<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 2000
1933 ACT REGISTRATION NO. 333-33778
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
(EXACT NAME OF REGISTRANT)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
120 Madison Street, Suite 1700, Syracuse, NY 13202
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
Depositor's Telephone Number, including Area Code
(888) 223-1860
<TABLE>
<S> <C>
Robert O. Sheppard, Esquire COPY TO:
Lincoln Life & Annuity Company of New York Jeremy Sachs, Esquire
120 Madison Street, Suite 1700 The Lincoln National Life
Syracuse NY 13202 Insurance Company
(NAME AND ADDRESS OF AGENT FOR SERVICE) 350 Church Street
Hartford, CT 06103
</TABLE>
Approximate date of proposed public offering: As soon as possible
after the effective date of the Registration Statement.
INDEFINITE NUMBER OF UNITS OF INTEREST IN VARIABLE LIFE INSURANCE CONTRACTS
(TITLE OF SECURITIES BEING REGISTERED)
An indefinite amount of the securities being offered by the Registration
Statement has been registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The first Form 24f-2 for the Registrant for the fiscal year
ending December 31, 1999 was filed March 24, 2000.
<PAGE>
CROSS REFERENCE SHEET
(RECONCILIATION AND TIE)
REQUIRED BY INSTRUCTION 4 TO FORM S-6
<TABLE>
<CAPTION>
ITEM OF FORM N-8B-2 LOCATION IN PROSPECTUS
- ------------------- ----------------------
<S> <C>
1 Cover Page, Highlights
2 Cover Page
3 *
4 Distribution of Policies
5 LLANY, the Separate Account and the General
Account
6(a) LLANY, the Separate Account and the General
Account
6(b) *
9 Legal Proceedings
10(a)-(c) Right-to-Examine Period; Surrenders of the
Policy; Accumulation Value; Reports to Owners
10(d) Right to Exchange the Policy; Policy Loans;
Surrenders of the Policy; Allocation of Net
Premium Payments
10(e) Lapse and Reinstatement
10(f) Voting Rights
10(g)-(h) Substitution of Securities
10(i) Premium Payments; Transfers; Death Benefit;
Policy Values; Settlement Options
11 The Funds
12 The Funds
13 Charges and Fees
14 The Policy
15 Premium Payments; Transfers
16 LLANY, the Separate Account and the General
Account
17 Surrender of the Policy
18 LLANY, the Separate Account and the General
Account
19 Reports to Owners
20 *
21 Policy Loans
22 *
23 LLANY, the Separate Account and the General
Account
24 Incontestability; Suicide; Misstatement of Age or
Gender
25 LLANY, the Separate Account and the General
Account
26 Fund Participation Agreements
27 LLANY, the Separate Account and the General
Account
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM OF FORM N-8B-2 LOCATION IN PROSPECTUS
- ------------------- ----------------------
<S> <C>
28 Directors and Officers of LLANY
29 LLANY, the Separate Account and the General
Account
30 *
31 *
32 *
33 *
34 *
35 *
37 *
38 Distribution of Policies
39 Distribution of Policies
40 *
41(a) Distribution of Policies
42 *
43 *
44 The Funds; Premium Payments
45 *
46 Surrender of the Policy
47 LLANY, the Separate Account and the General
Account; Surrender of the Policy, Transfers
48 *
49 *
50 LLANY, the Separate Account and the General
Account
51 Cover Page; Highlights; Premium Payments; Right
to Exchange the Policy
52 Substitution of Securities
53 Tax Matters
54 *
55 *
</TABLE>
* Not Applicable
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HOME OFFICE LOCATION:
120 MADISON STREET
SUITE 1700
SYRACUSE, NY 13202
(888) 223-1860
ADMINISTRATIVE OFFICE:
PERSONAL SERVICE CENTER MVLI
350 CHURCH STREET
HARTFORD, CT 06103-1106
(800) 444-2363
- --------------------------------------------------------------------------------
A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
BENEFITS PAYABLE ON DEATH OF SECOND OF TWO INSUREDS
- --------------------------------------------------------------------------------
This Prospectus describes SVUL-II, a flexible premium variable universal life
insurance contract (the "Policy"), offered by Lincoln Life & Annuity Company of
New York ("LLANY" "we", "our" or "us"). The Policy provides death benefits when
the second of the two named Insureds dies (a "Second Death Policy").
The Policy features include flexible premium payments; a choice of one of two
death benefit options; and a choice of underlying investment options.
It may not be advantageous to replace existing insurance or supplement an
existing flexible premium variable life insurance contract with the Policy. This
Prospectus and the Prospectuses of the Funds furnished with this Prospectus
should be read carefully to understand the Policy being offered.
The Policy described in this Prospectus is available only in New York.
You may allocate net premiums to the Sub-Accounts of our Flexible Premium
Variable Life Account R ("Separate Account"). Each Sub-Account invests in one of
the Funds listed below:
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
AMERICAN FUNDS INSURANCE SERIES
(ALSO KNOWN AS AMERICAN VARIABLE
INSURANCE SERIES)
Global Small Capitalization Fund -- Class 2
Growth Fund -- Class 2
Growth-Income Fund -- Class 2
BARON CAPITAL FUNDS TRUST
Baron Capital Asset Fund -- Insurance Shares
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
(FORMERLY BT INSURANCE FUNDS TRUST)
EAFE-Registered Trademark- Equity Index Fund
Equity 500 Index Fund
Small Cap Index Fund
DELAWARE GROUP PREMIUM FUND
Devon Series -- Standard Class
Emerging Markets Series -- Standard Class
High Yield Series -- Standard Class
(formerly Delchester Series)
REIT Series -- Standard Class
Small Cap Value Series -- Standard Class
Trend Series -- Standard Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio -- Service Class
High Income Portfolio -- Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio -- Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
Growth Opportunities Portfolio -- Service Class
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Templeton Growth Securities Fund -- Class 2
(formerly Templeton Stock Fund)
Templeton International Securities Fund -- Class 2
(formerly Templeton International Fund)
JANUS ASPEN SERIES
Janus Aspen Balanced Portfolio -- Institutional Shares
Janus Aspen Global Technology Portfolio -- Service Shares
Janus Aspen Worldwide Growth Portfolio -- Institutional Shares
LINCOLN NATIONAL (LN)
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc.
LN Equity-Income Fund, Inc.
LN Global Asset Allocation Fund, Inc.
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
AMT Mid-Cap Growth Portfolio
AMT Partners Portfolio
TO BE VALID, THIS PROSPECTUS MUST HAVE THE CURRENT MUTUAL FUNDS' PROSPECTUSES
WITH IT. KEEP ALL FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A
CRIMINAL OFFENSE TO STATE OTHERWISE.
PROSPECTUS DATED: MAY 12, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- --------
<S> <C>
HIGHLIGHTS............................ 3
Initial Choices To Be Made.......... 3
Level or Varying Death Benefit...... 3
Amount of Premium Payment........... 4
Selection of Funding Vehicles....... 4
Charges and Fees.................... 5
Fund Expenses....................... 6
Changes in Specified Amount......... 9
LLANY, THE SEPARATE ACCOUNT AND THE
GENERAL ACCOUNT...................... 9
BUYING VARIABLE LIFE INSURANCE........ 10
Replacements........................ 11
APPLICATION........................... 11
OWNERSHIP............................. 12
BENEFICIARY........................... 12
INSUREDS.............................. 13
THE POLICY............................ 13
Policy Specifications............... 13
PREMIUM FEATURES...................... 13
Planned Premiums; Additional
Premiums........................... 13
Limits on Right to Make Payments
of Additional and Planned
Premiums......................... 14
Premium Load; Net Premium
Payment.......................... 14
RIGHT-TO-EXAMINE PERIOD............... 14
TRANSFERS AND ALLOCATION AMONG
ACCOUNTS............................. 14
Allocation of Net Premium
Payments........................... 14
Transfers........................... 15
Optional Sub-Account Allocation
Programs........................... 15
Dollar Cost Averaging............. 15
Automatic Rebalancing............. 16
POLICY VALUES......................... 16
Accumulation Value.................. 16
Separate Account Value.............. 17
Accumulation Unit Value........... 17
Accumulation Units................ 17
Fixed Account and Loan Account
Value.............................. 17
Net Accumulation Value.............. 18
FUNDS................................. 18
Substitution of Securities.......... 23
Voting Rights....................... 23
Fund Participation Agreements....... 23
CHARGES AND FEES...................... 23
Premium Load; Net Premium Payment... 24
Deductions Made Monthly............. 24
Monthly Deduction................. 24
Cost of Insurance Charge.......... 24
Mortality and Expense Risk Charge... 25
Surrender Charges................... 25
Transaction Fee for Excess
Transfers.......................... 26
DEATH BENEFITS........................ 26
Death Benefit Options............... 26
Changes in Death Benefit Options and
Specified Amount................... 27
Federal Income Tax Definition of
Life Insurance..................... 27
</TABLE>
<TABLE>
NOTICE OF DEATH OF INSUREDS........... 28
<CAPTION>
CONTENTS PAGE
- -------- --------
<S> <C>
PAYMENT OF DEATH BENEFIT PROCEEDS..... 28
Settlement Options.................. 28
POLICY LIQUIDITY...................... 28
Policy Loans........................ 29
Partial Surrender................... 29
Surrender of the Policy............. 30
Surrender Value................... 30
Deferral of Payment and Transfers... 30
ASSIGNMENT; CHANGE OF OWNERSHIP....... 30
LAPSE AND REINSTATEMENT............... 31
Lapse of a Policy................... 31
Reinstatement of a Lapsed Policy.... 31
COMMUNICATIONS WITH LLANY............. 32
Proper Written Form................. 32
OTHER POLICY PROVISIONS............... 32
Issuance............................ 32
Date of Coverage.................... 32
Right to Exchange the Policy........ 32
Maturity of the Policy.............. 32
Incontestability.................... 32
Misstatement of Age or Gender....... 33
Suicide............................. 33
Riders.............................. 33
Nonparticipating Policies........... 33
TAX ISSUES............................ 33
Taxation of Life Insurance Contracts
in General......................... 33
Policies Which Are MECS............. 34
Policies Which Are Not MECS......... 35
Last Survivor Contract.............. 36
Other Considerations................ 36
Tax Status of LLANY................. 37
FAIR VALUE OF THE POLICY.............. 37
DIRECTORS AND OFFICERS OF LLANY....... 37
DISTRIBUTION OF POLICIES.............. 39
CHANGES OF INVESTMENT POLICY.......... 39
OTHER CONTRACTS ISSUED BY LLANY....... 40
STATE REGULATION...................... 40
REPORTS TO OWNERS..................... 40
ADVERTISING........................... 40
LEGAL PROCEEDINGS..................... 40
EXPERTS............................... 41
REGISTRATION STATEMENT................ 41
Appendix 1............................ 42
Illustration of Accumulation Values,
Surrender Values, and Death Benefit
Proceeds........................... 42
Appendix 2............................ 47
Corridor Percentages................ 47
Financial Statements..................
Separate Account R.................. R-1
Lincoln Life & Annuity Company
of New York........................ S-1
</TABLE>
2
<PAGE>
HIGHLIGHTS
This section is an overview of key Policy features. Your
Policy is a flexible premium variable universal life
insurance policy. Your Policy insures two Insureds. If one
of the Insureds dies, the Policy pays no death benefit. Your
Policy will pay the death benefit only when the second
Insured dies. A "second-to-die" policy might be suitable
when both of the Insureds have income of their own and only
want to provide financial support for their dependents if
both of them should die, or to provide liquidity to heirs
when the Second Insured dies. If replacement income or
immediate cash liquidity is needed upon the death of one
Insured, this type of policy may not be suitable.
The Policy's value may change on a:
1) fixed basis;
2) variable basis; or a
3) combination of both fixed and variable bases.
Review your personal financial objectives and discuss them
with a qualified financial counselor before you buy a
"second-to-die" variable life insurance policy. As a death
benefit is only paid upon the second Insured's death, this
Policy may, or may not, be appropriate for your financial
goals. The value of the Policy and, under one option, the
death benefit amount, depends on the investment results of
the funding options you select.
At all times, your Policy must qualify as life insurance
under the Internal Revenue Code of 1986 (the "Code") to
receive favorable tax treatment under Federal law. If these
requirements are met, you may benefit from such tax
treatment. LLANY reserves the right to return your premium
payments if they result in your Policy failing to meet Code
requirements.
If you are already entitled to favorable tax treatment, you
should satisfy yourself that this Policy meets your other
financial goals before you buy it.
INITIAL CHOICES TO BE MADE
The Policy Owner (the "Owner" or "you") is the person named
in the "Policy Specifications" who has all of the Policy
ownership rights. You, as the Owner, have three important
choices to make when the Policy is first purchased. You need
to choose:
1) one of the two Death Benefit Options;
2) the amount of premium you want to pay; and
3) the amount of your Net Premium Payment to be placed in
each of the funding options you select. The Net Premium
Payment is the balance of your Premium Payment that
remains after certain charges are deducted from it.
LEVEL OR VARYING DEATH BENEFIT
The Death Benefit is the amount LLANY pays to the
Beneficiary(ies) when the second Insured dies. Before we pay
the Beneficiary(ies), any outstanding loan account balances
or outstanding amounts due are subtracted from the Death
Benefit. LLANY calculates the Death Benefit payable as of
the date of the second Insured's death.
When you purchase your Policy, you must choose one of two
Death Benefit Options:
1) a level death benefit; or
2) a varying death benefit.
3
<PAGE>
If you choose the level Death Benefit Option, the Death
Benefit will be the greater of:
1) the "Specified Amount," which is the amount of the death
benefit in effect for the Policy when the second Insured
died (The Specified Amount is on the Policy's Specification
Page); or
2) the "Corridor Death Benefit," which is the death benefit
calculated as a percentage of the Accumulation Value. The
Net Accumulation Value is the total of the balances in the
Fixed Account and the Separate Account minus any outstanding
Loan Account amounts.
If you choose the varying Death Benefit Option, the Death
Benefit will be the greater of:
1) the Specified Amount plus the Net Accumulation Value when
the second Insured died; or
2) the Corridor Death Benefit.
See page 26 for more details.
AMOUNT OF PREMIUM PAYMENT
When you apply for your Policy, you must decide how much
premium to pay. Premium payments may be changed within
certain limits. (See page 14.)
You may use the value of the Policy to pay the premiums due
and continue the Policy in force if sufficient values are
available for premium payments. Be careful; if the
investment options you choose do not do as well as you
expect, there may not be enough value to continue the Policy
in force without more premium payments. Charges against
Policy values for the cost of insurance (see page 24)
increase as the Insureds get older.
If your Policy lapses because your Monthly Premium Deduction
is larger than the Net Accumulation Value, you may reinstate
your Policy. (See page 32.)
When you first receive your Policy you will have 10 days to
look it over. This is called the "Right-to-Examine" time
period. Use this time to review your Policy and make sure
that it meets your needs. During this time period, your
Initial Premium Payment will be deposited in the Money
Market Sub-Account. If you then decide you do not want your
Policy, we will return all Premium Payments to you with no
interest paid. (See page 14.)
SELECTION OF FUNDING VEHICLES
VARIABLE ACCOUNT
This Prospectus focuses on the Separate Account investment
information that makes up the "variable" part of the Policy.
If you put money into the Funds, you take all the investment
risk on that money. This means that if the mutual funds(s)
you select go up in value, the value of your Policy, net of
charges and expenses, also goes up. If they lose value, so
does your Policy. Each fund has its own investment
objective. You should carefully read each fund's Prospectus
before making your decision.
You must choose the Fund(s) in which you want to place each
Net Premium Payment. These "Sub-Accounts" make up the
Separate Account. Each Sub-Account invests in shares of a
certain Fund. You may also place your Net Premium Payment or
part of it into the Fixed Account. A Sub-Account is not
guaranteed and will increase or decrease in value according
to the particular Fund's investment performance. (See page
18.)
4
<PAGE>
FIXED ACCOUNT
You may also use LLANY's Fixed Account to fund your Policy.
Net Premium Payments made into the Fixed Account:
- become part of LLANY's General Account;
- do not share the investment experience of the Separate
Account; and
- have a guaranteed minimum interest rate of 4% per year.
Interest beyond 4% is credited at LLANY's discretion.
For additional information, see page 10.
CHARGES AND FEES
You will be charged:
- A premium load of no more than 8% from each Premium
Payment during the first 15 Policy Years, and no more
than 5% thereafter.
- A $10 monthly deduction for administrative purposes.
- A monthly maximum charge of $0.15 per $1000 of initial
Specified Amount for distribution associated expenses for
the first 120 months from issue date or from the date of
an increase in Specified Amount. If an increase occurs,
your current insurance age will be your issue age for the
new coverage.
- A Cost of Insurance charge based on sex, issue age,
duration and premium class of each Insured.
- A daily mortality and expense risk charge which is at an
annual rate of 0.80% and is guaranteed not to exceed
that.
Each Fund has its own management fee charge, also deducted
daily. Each Fund's expense levels will affect its investment
results. The table on page 6 shows you the current expense
levels for each Fund.
Each Policy Year you will be allowed to make 12 transfers
between funding options. Beyond 12, a $25 fee may apply.
(See page 15.)
SURRENDER IN FULL. You may surrender the Policy in full. If
you do so during the first 15 policy years we retain a
certain amount as a Surrender Charge, and deduct it from the
amount due you. Also, if you surrender in full during the
first 15 years of any increase in Specified Amount, we
retain a certain amount as a Surrender Charge for
surrendering the increase, in addition to any existing
surrender charge for the original Policy. PARTIAL SURRENDER.
Each time you request a partial surrender of your Policy we
charge you an administrative fee of $25, but not more than
2% of the amount withdrawn. (See page 25.)
You may borrow within described limits against the Policy.
If you borrow against your Policy, interest will be charged
to the Loan Account, at an annual interest rate of 8%. For
the first ten Policy Years interest will be credited to the
Loan Account Value at the annual rate of interest charged
for a loan minus 1%. For Policy Years eleven and beyond,
interest will be credited at an annual rate equal to the
current interest rate charged. (See page 29.)
LLANY may derive a profit from its charges and may use these
profits to finance distribution of the Policies.
5
<PAGE>
FUND EXPENSES
The investment advisor for each of the Funds deducts a daily
charge as a percent of the net assets in each fund as an
asset management charge. The charge reflects asset
management fees of the investment advisor (Management Fees),
and other expenses incurred by the funds (including 12b-1
fees for a class of shares and Other Expenses). The charge
has the effect of reducing the investment results credited
to the Sub-Accounts. Future Fund expenses will vary.
<TABLE>
<CAPTION>
TOTAL
ANNUAL
FUND TOTAL FUND
OPERATING OPERATING
EXPENSES TOTAL EXPENSES
WITHOUT WAIVERS WITH
MANAGEMENT 12B-1 OTHER WAIVERS OR AND WAIVERS OR
FUND FEES FEES EXPENSES REDUCTIONS REDUCTIONS REDUCTIONS
--------------------------- ----------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Growth Fund....... 0.63% N/A 0.10% 0.73% N/A 0.73%
AIM V.I. International
Equity Fund.............. 0.75% N/A 0.22% 0.97% N/A 0.97%
AIM V.I. Value Fund........ 0.61% N/A 0.15% 0.76% N/A 0.76%
AFIS Global Small
Capitalization Fund
Class 2.................. 0.78% 0.25% 0.03% 1.06% N/A 1.06%
AFIS Growth Fund
Class 2.................. 0.38% 0.25% 0.01% 0.64% N/A 0.64%
AFIS Growth Income Fund
Class 2.................. 0.34% 0.25% 0.01% 0.60% N/A 0.60%
Baron Capital Asset
Fund (2)................. 1.00% 0.25% 0.63% 1.88% (0.38%) 1.50%
Delaware Devon Series --
Standard Class (3a)...... 0.65% N/A 0.10% 0.75% N/A 0.75%
Delaware Emerging Markets
Series -- Standard
Class (3b)............... 1.25% N/A 0.28% 1.53% (0.06%) 1.47%
Delaware High Yield Series
(formerly Delchester)
Standard Class (3c)...... 0.65% N/A 0.07% 0.72% N/A 0.72%
Delaware REIT Series
Standard Class (3d)...... 0.75% N/A 0.21% 0.96% (0.11%) 0.85%
Delaware Small Cap Value
Series Standard
Class (3e)............... 0.75% N/A 0.10% 0.85% N/A 0.85%
Delaware Trend Series
Standard Class (3f)...... 0.75% N/A 0.07% 0.82% N/A 0.82%
Deutsche VIT EAFE Index
Fund (4)................. 0.45% N/A 0.70% 1.15% (0.50%) 0.65%
Deutsche VIT Equity 500
Index Fund (4)........... 0.20% N/A 0.23% 0.43% (0.13%) 0.30%
Deutsche VIT Small Cap
Index Fund (4)........... 0.35% N/A 0.83% 1.18% (0.73%) 0.45%
Fidelity VIP Growth
Portfolio Service
Class (5)................ 0.58% 0.10% 0.09% 0.77% N/A 0.77%
Fidelity VIP High Income
Portfolio Service
Class (5)................ 0.58% 0.10% 0.11% 0.79% N/A 0.79%
Fidelity VIP II ContraFund
Portfolio -- Service
Class (5)................ 0.58% 0.10% 0.10% 0.78% N/A 0.78%
Fidelity VIP III Growth
Opportunities Portfolio
Service Class (5)........ 0.58% 0.10% 0.11% 0.79% N/A 0.79%
Janus Aspen Series Balanced
Portfolio (Institutional
Shares) (6).............. 0.65% N/A 0.02% 0.67% N/A 0.67%
Janus Aspen Series Global
Technology Portfolio
(Service Shares) (6)..... 0.65% 0.25% 0.13% 1.03% N/A 1.03%
Janus Aspen Series
Worldwide Growth
Portfolio (6)............ 0.65% N/A 0.05% 0.70% N/A 0.70%
LN Bond Fund............... 0.45% N/A 0.08% 0.53% N/A 0.53%
LN Capital Appreciation
Fund..................... 0.72% N/A 0.06% 0.78% N/A 0.78%
LN Equity-Income Fund...... 0.72% N/A 0.07% 0.79% N/A 0.79%
LN Global Asset Allocation
Fund..................... 0.72% N/A 0.19% 0.91% N/A 0.91%
LN Money Market Fund....... 0.48% N/A 0.11% 0.59% N/A 0.59%
LN Social Awareness Fund... 0.33% N/A 0.05% 0.38% N/A 0.38%
MFS Emerging Growth
Series (7)............... 0.75% N/A 0.09%(1) 0.84% N/A 0.84%
MFS Total Return
Series (7)............... 0.75% N/A 0.15%(1) 0.90% N/A 0.90%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
TOTAL
ANNUAL
FUND TOTAL FUND
OPERATING OPERATING
EXPENSES TOTAL EXPENSES
WITHOUT WAIVERS WITH
MANAGEMENT 12B-1 OTHER WAIVERS OR AND WAIVERS OR
FUND FEES FEES EXPENSES REDUCTIONS REDUCTIONS REDUCTIONS
--------------------------- ----------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
MFS Utilities
Series (7)............... 0.75% N/A 0.16%(1) 0.91% N/A 0.91%
Neuberger Berman AMT
Mid-Cap Growth
Portfolio (8)............ 0.85% N/A 0.23% 1.08% (0.08%) 1.00%
Neuberger Berman AMT
Partners
Portfolio (8)............ 0.80% N/A 0.07% 0.87% N/A 0.87%
Templeton Growth Securities
Fund Class 2 (9 a,b,c)... 0.83% 0.25% 0.05% 1.13% N/A 1.13%
Templeton International
Securities Fund
Class 2 (9 b,d).......... 0.69% 0.25% 0.19% 1.13% N/A 1.13%
</TABLE>
---------------------------------------------------
(1) Certain of the fund advisers reimburse the company for
administrative costs incurred in connection with
administering the funds as variable funding options
under the contract. These reimbursements are generally
paid out of the management fees and are not charged to
investors.
(2) The Adviser is contractually obligated to reduce its
fee to the extent required to limit Baron Capital Asset
Fund's total operating expenses to 1.5% for the first
$250 million of assets in the Fund, 1.35% for Fund
assets over $250 million and 1.25% for Fund assets over
$500 million. Without the expense limitations, total
operating expenses for the Fund for the period
January 1, 1999 through December 31, 1999 would have
been 1.88%.
(3) (a)The investment advisor for the Devon Series is
Delaware Management Company ("DMC"). Effective
May 1, 2000 through October 31, 2000, DMC has
voluntarily agreed to waive its management fee and
reimburse each Series for expenses to the extent
that total expenses will not exceed 0.80%. Under its
Management Agreement, the Series pays a management
fee based on average daily net assets as follows:
0.65% on the first $500 million, 0.60% on the next
$500 million, 0.55% on the next $1,500 million,
0.50% on assets in excess of $2,500 million; all per
year.
(b)The investment advisor for the Emerging Markets
Series is Delaware International Advisers Ltd.
("DIAL"). Effective May 1, 2000 through October 31,
2000, DIAL has voluntarily agreed to waive its
management fee and reimburse the Series for expenses
to the extent that total expenses will not exceed
1.50%. Without such an arrangement, the total annual
operating expenses for the Series would have been
1.53%. Under its Management Agreement, the
Series pays a management fee based on average daily
net assets as follows: 1.25% on the first
$500 million, 1.20% on the next $500 million, 1.15%
on the next $1,500 million, 1.10% on assets in
excess of $2,500 million; all per year.
(c)The investment advisor for the High Yield Series is
Delaware Management Company ("DMC"). Effective
May 1, 2000 through October 31, 2000, DMC has
voluntarily agreed to waive its management fee and
reimburse the Series for expenses to the extent that
total expenses will not exceed 0.80%. Under its
Management Agreement, the Series pays a management
fee based on average daily net assets as follows:
0.65% on the first $500 million, 0.60% on the next
$500 million, 0.55% on the next $1,500 million,
0.50% on assets in excess of $2,500 million; all per
year.
(d)The investment advisor for the REIT Series is
Delaware Management Company ("DMC"). Effective
May 1, 2000 through October 31, 2000, DMC has
voluntarily agreed to waive its management fee and
reimburse the Series for expenses to the extent that
total expenses will not exceed 0.85%. Without such
an arrangement, the total annual operating expenses
for the Series would have been 0.96%. Under its
Management Agreement, the Series pays a management
fee based on average daily net assets as follows:
0.75% on the first $500 million, 0.70% on the next
$500 million, 0.65% on the next $1,500 million,
0.60% on assets in excess of $2,500 million; all per
year.
(e)The investment advisor for the Small Cap Value
Series is Delaware Management Company ("DMC").
Effective May 1, 2000 through October 31, 2000, DMC
has voluntarily agreed to waive its management fee
and reimburse the Series for expenses to the extent
that total expenses will not exceed 0.85%. Under its
Management Agreement, the Series pays a management
fee based on average daily net assets as follows:
0.75% on the first $500 million, 0.70% on the next
$500 million, 0.65% on the next $1,500 million,
0.60% on assets in excess of $2,500 million; all per
year.
(f)The investment advisor for the Trend Series is
Delaware Management Company ("DMC"). Effective
May 1, 2000 through October 31, 2000, DMC has
voluntarily agreed to waive its management fee and
reimburse the Series for expenses to the extent that
total expenses will not exceed 0.85%. Under
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its Management Agreement, the Series pays a
management fee based on average daily net assets as
follows: 0.75% on the first $500 million, 0.70% on
the next $500 million, 0.65% on the next
$1,500 million, 0.60% on assets in excess of
$2,500 million; all per year.
(4) Under the Advisory Agreement with Bankers Trust Company
(the "Advisor"), the fund will pay an advisory fee at
an annual percentage rate of 0.20% of the average daily
net assets of the Equity 500 Index Fund. These fees are
accrued daily and paid monthly. The Advisor has
voluntarily undertaken to waive its fee and to
reimburse the fund for certain expenses so that the
fund's total operating expenses will not exceed 0.30%
of average daily net assets. Under the Advisory
Agreement with the "Advisor", the Small Cap Index Fund
will pay an advisory fee at an annual percentage rate
of 0.35% of the average daily net assets of the fund.
These fees are accrued daily and paid monthly. The
Advisor has voluntarily undertaken to waive its fee and
to reimburse the fund for certain expenses so that the
fund's total operating expenses will not exceed 0.45%
of average daily net assets. Under the Advisory
Agreement the "Advisor", the EAFE Equity Index Fund
will pay an advisory fee at an annual percentage rate
of 0.45% of the average daily net assets of the fund.
These fees are accrued daily and paid monthly. The
Advisor has voluntarily undertaken to waive its fee and
to reimburse the fund for certain expenses so that the
fund's total operating expenses will not exceed 0.65%
of average daily net assets. Without the reimbursement
to the Funds for the year ended 12/31/99 total expenses
would have been 0.43% for the Equity 500 Index Fund,
1.18% for the Small Cap Index Fund and 1.15% for the
EAFE Equity Index Fund.
(5) A portion of the brokerage commissions that certain
funds pay was used to reduce fund expenses. In
addition, through arrangements with certain funds', or
FMR on behalf of certain funds' custodian, credits
realized as a result of uninvested cash balances were
used to reduce a portion of each applicable fund's
expenses. The total operating expenses, after
reimbursement would have been: Growth 0.75% (service);
Contrafund 0.75% (service); Growth Opportunities 0.78%
(service).
(6) Expenses (except for Global Technology Portfolio) are
based upon expenses for the fiscal year ended
December 31, 1999, restated to reflect a reduction in
the management fee for Worldwide Growth, and Balanced
Portfolios. Expenses for Global Technology Portfolio
are based on the estimated expenses that the Portfolio
expects to incur in its initial fiscal year. All
expenses are shown without the effect of expense offset
arrangements.
(7) Each series has an expense offset arrangement which
reduces the series' custodian fee based on the amount
of cash maintained by the series with its custodian and
dividend disbursing agent. Each series may enter into
other such arrangement and directed brokerage
arrangements, which would also have the effect of
reducing the series' expenses. "Other Expenses" do not
take into account these expense reductions, and are
therefore higher than the actual expenses of the
series. Had the fee reductions been taken into account,
"Net Expenses" would be lower for certain series and
would equal:
0.83% for Emerging Growth Series
0.89% for Total Return Series
0.90% for Utilities Series
(8) Expenses reflect expense reimbursement. Neuberger
Berman Management Inc. ("NBMI") has undertaken through
May 1, 2001 to reimburse certain operating expenses,
including the compensation of NBMI and excluding taxes,
interest, extraordinary expenses, brokerage commissions
and transaction costs, that exceed in the aggregate,
1.0% of the AMT Mid-Cap Growth Portfolio's average
daily net asset value. Absent such reimbursement, Total
Annual Expenses for the portfolio for the year ended
December 31, 1999 would have been 1.08%.
(9) (a)The fund administration fee is paid indirectly
through the management fee.
(b)The fund's class 2 distribution plan or "rule 12b-1
plan" is described in the fund's prospectus. While
the maximum amount payable under the fund's class 2
rule 12b-1 plan is 0.35% per year of the fund's
average daily net assets, the Board of Trustees of
Franklin Templeton Variable Insurance Products Trust
has set the current rate at 0.25% per year.
(c)On 2/8/00, a merger and reorganization was approved
that combined the fund with a similar fund of the
Templeton Variable Products Series Fund, effective
5/1/00. The table shows total expenses based on the
fund's assets as of 12/31/99, and not the assets of
the combined fund. However, if the table reflected
combined assets, the fund's expenses after 5/01/00
would be estimated as: Management Fees 0.80%,
Distribution and Service Fees 0.25%, Other Expenses
0.05%, and Total Fund Operating Expenses 1.10%.
(d)On 2/8/00, shareholders approved a merger and
reorganization that combined the fund with the
Templeton International Equity Fund. The
shareholders of that fund approved new management
fees, which apply to the combined fund effective
5/1/00. The table shows restated total expenses
based on the new fees and the assets of the fund as
of 12/31/99, and not the assets of the combined
fund.
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However, if the table reflected both the new fees
and the combined assets, the fund's expenses after
5/1/00 would be estimated as: Management Fees 0.65%,
Distribution and Service Fees 0.25%, Other Expenses
0.20%, and Total Fund Operating Expenses 1.10%.
CHANGES IN SPECIFIED AMOUNT
The Initial Specified Amount is the amount originally chosen
by the Policy Owner and is equal to the Death Benefit.
Within certain limits, you may decrease or, with
satisfactory evidence of insurability, increase the
Specified Amount. The minimum specified amount is currently
$250,000. Such changes will affect other aspects of your
Policy. See page 26.
LLANY, THE SEPARATE ACCOUNT AND
THE GENERAL ACCOUNT
Lincoln Life & Annuity Company of New York is a life
insurance company chartered under New York law on June 6,
1996. Wholly-owned by The Lincoln National Life Insurance
Company ("Lincoln Life") and in turn by Lincoln National
Corporation ("LNC"), a publicly held Indiana insurance
holding company incorporated in 1968, it is licensed to sell
life insurance and annuity contracts in New York. Its
principal office is at 120 Madison Street, Suite 1700,
Syracuse, NY 13202. LLANY, Lincoln Life, LNC and their
affiliates comprise the "Lincoln Financial Group" which
provides a variety of wealth accumulation and protection
products and services.
LLANY Separate Account R for Flexible Premium Variable Life
Insurance ("Account R") is a "separate account" established
pursuant to a resolution of the Board of Directors of LLANY.
Under New York law, the assets of Account R attributable to
the Policies, though LLANY's property, are not chargeable
with liabilities of any other business of LLANY and are
available first to satisfy LLANY's obligations under the
Policies. Account R's income, gains, and losses are credited
to or charged against Account R without regard to other
income, gains, or losses of LLANY. Account R's values and
investment performance are not guaranteed. Account R is
registered with the Securities and Exchange Commission (the
"Commission") as a "unit investment trust" under the 1940
Act and meets the 1940 Act's definition of "separate
account". Such registration does not involve supervision by
the Commission of Account R's or LLANY's management,
investment practices, or policies. LLANY has other
registered separate accounts which fund its variable life
insurance policies and variable annuity contracts.
Account R is divided into Sub-Accounts, each of which is
invested solely in the shares of one of the mutual funds or
the Fixed Account available as funding vehicles under the
Policies. On each Valuation Day, Net Premium Payments
allocated to Account R will be invested in Fund shares at
net asset value, and monies necessary to pay for deductions,
charges, transfers and surrenders from Account R are raised
by selling Fund shares at net asset value.
The Funds are listed with their investment objectives, which
they may or may not achieve. (See "FUNDS.") More Fund
information is in the Funds' prospectuses, which must
accompany or precede this prospectus and should be read
carefully. Some Funds have investment objectives and
policies similar to those of other funds managed by the same
investment adviser. Their investment results may be higher
or lower than those of the other funds, and there can be no
assurance, and no representation is made, that a Fund's
investment results will be comparable to the investment
results of any other fund.
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We reserve the right to add, withdraw or substitute Funds,
subject to the conditions of the Policy and to compliance
with regulatory requirements, if in our sole discretion
legal, regulatory, marketing, tax or investment
considerations so warrant or in the event a particular Fund
is no longer available for investment by the Sub-Accounts.
No substitution will take place without prior approval of
the Commission, to the extent required by law.
Shares of the Funds may be used by us and other insurance
companies to fund both variable annuity contracts and
variable life insurance policies. While this is not
perceived as problematic, the Funds' governing bodies
(Boards of Directors/Trustees) have agreed to monitor events
to identify any material irreconcilable conflicts which
might arise and to decide what responsive action might be
appropriate. If a Sub-Account were to withdraw its
investment in a Fund because of a conflict, a Fund might
have to sell portfolio securities at unfavorable prices.
A Policy may also be funded in whole or in part through the
"Fixed Account", part of LLANY's General Account supporting
its insurance and annuity obligations. We will credit
interest on amounts held in the Fixed Account as we
determine from time to time, but not less than 4% per year.
Interest, once credited, and Fixed Account principal are
guaranteed. Interests in the Fixed Account have not been
registered under the 1933 Act in reliance on exemptive
provisions. The Commission has not reviewed Fixed Account
disclosures, but they are subject to securities law
provisions relating to accuracy and completeness.
BUYING VARIABLE LIFE INSURANCE
The Policies this Prospectus offers are variable life
insurance policies which provide death benefit protection.
Investors not needing death benefit protection should
consider other forms of investment, as there are extra costs
and expenses of providing the insurance feature. Further,
life insurance purchasers who are risk-aversive or want more
predictable premium levels and benefits may be more
comfortable buying more traditional, non-variable life
insurance. However, variable life insurance is a flexible
tool for financial and investment planning for persons
needing death benefit protection and willing to assume
investment risk and to monitor investment choices they have
made.
Flexibility starts with the ability to make differing levels
of premium payments. A young family just starting out may
only be able to pay modest premiums initially but hope to
increase premium payments over time. At first, this family
would be paying primarily for the insurance feature (perhaps
at ages where the insurance cost is relatively low) and
later use a Policy more as a savings vehicle. A customer at
peak earning capacity may wish to pay substantial premiums
for a limited number of years prior to retirement, after
which Policy values may suffice, based on future expected
return results, though not guaranteed, to keep the Policy
inforce for the expected lifetime and to provide, through
loans, supplemental retirement income. A customer may be
able to pay a large single premium, using the Policy
primarily as a savings and investment vehicle for potential
tax advantages.
Sufficient premiums must always be paid to keep a policy
inforce, and there is a risk of lapse if premiums are too
low in relation to the insurance amount and if investment
results are less favorable than anticipated.
Flexibility also results from being able to select, monitor
and change investment choices within a Policy. With the wide
variety of fund options available, it is possible to
finetune an investment mix and change it to meet changing
personal objectives or investment conditions. Policy owners
should be prepared to monitor their investment choices on an
ongoing basis.
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Variable life insurance has significant tax advantages under
current tax law. A transfer of values from one fund to
another within the Policy generates no taxable gain or loss.
And any investment income and realized capital gains within
a fund are automatically reinvested without being taxed to
the Policy owners. Policy values therefore accumulate on a
tax-deferred basis. These situations would normally result
in immediate tax liabilities in the case of direct
investment in mutual funds.
While these tax deferral features also apply to variable
annuities, liquidity (the ability of Policy owners to access
Policy values) is normally more easily achieved with
variable life insurance. Unless a policy has become a
"modified endowment contract," (see "TAX ISSUES"), an Owner
can borrow Policy values tax-free, without surrender charges
and at very low net interest cost. Policy loans can be a
source of retirement income. Variable annuity withdrawals
are generally taxable to the extent of accumulated income,
may be subject to surrender charges, and will result in
penalty tax if made before age 59 1/2.
Depending on the death benefit option chosen, accumulated
Policy values may also be part of the eventual death benefit
payable. If a Policy is heavily funded and investment
performance is very favorable, the death benefit may
increase even further because of tax law requirements that
the death benefit be a certain multiple of Policy value,
depending on the Insured's ages. (See "DEATH BENEFITS.") The
death benefit is income-tax free and may, with proper estate
planning, be estate-tax free. A tax advisor should be
consulted.
There are costs and expenses of variable life insurance
ownership which are directly related to Policy values (i.e.
asset based costs) as is true with investment in mutual
funds or variable annuities. A significant additional cost
of variable life insurance is the "cost of insurance" charge
which is imposed on the "amount at risk" (the death benefit
less Policy value) and increases as the insured grows older.
This charge varies by age, underwriting classification,
smoking status and by gender. The effect of its increase can
be seen in illustrations in this Prospectus (see Appendix 1)
or in personalized illustrations available upon request.
Surrender Charges, which decrease over time, are another
significant additional cost if the Policy is not retained.
REPLACEMENTS
Before purchasing the Policy to replace, or to be funded
with proceeds borrowed or withdrawn from, an existing life
insurance policy, an applicant should consider a number of
matters. Will any commission will be paid to an agent or any
other person with respect to the replacement? Are coverages
and comparable values are available from the Policy, as
compared to his or her existing policy? For example, the
Insureds may no longer be insurable, or the contestability
period may have elapsed with respect to the existing policy,
while the Policy could be contested. The Owner should
consider similar matters before deciding to replace the
Policy or withdraw funds from the Policy for the purchase of
funding a new policy of life insurance.
APPLICATION
Any person who wants to buy a Policy must first complete an
application on a form provided by LLANY.
A complete application identifies the prospective Insureds
and provides sufficient information about them to permit
LLANY to begin underwriting the risks under the Policy. We
require medical history and examination of each of the
Insureds. LLANY may decline to provide insurance on the
lives of the Insureds or, if it agrees to provide
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insurance, it may place one or both Insureds into a special
underwriting category (these include preferred, non-smoker
standard, smoker standard, non-smoker substandard and smoker
substandard). The amount of the Cost of Insurance deducted
monthly from the Policy value after issue varies among the
underwriting categories as well as by Age and gender of the
Insureds.
The applicant will select the Beneficiary or Beneficiaries
who are to receive Death Benefit Proceeds payable on the
Second Death, the initial face amount (the Initial Specified
Amount) of the Death Benefit and which of two methods of
computing the Death Benefit is to be used. (See "DEATH
BENEFITS."). The applicant will also indicate both the
frequency and amount of Premium Payments. (See "PREMIUM
FEATURES.") The applicant must also determine how Policy
values are initially to be allocated among the available
funding options following the expiration of the
Right-to-Examine Period. (See "RIGHT-TO-EXAMINE PERIOD").
OWNERSHIP
The Owner is the person or persons named as Owner in the
application, and on the Date of Issue will usually be
identified as Owner in the Policy Specifications. If no
person is identified as Owner in the Policy Specifications,
then the Insureds are the Owner. The person or persons
designated to be Owner of the Policy must have, or hold
legal title for the sole benefit of a person who has, an
"insurable interest" in the lives of each of the Insureds
under applicable state law. The Owner may be either or both
of the Insureds, or any other natural person or non-natural
entity. The Owner owns and exercises the rights under the
Policy prior to the Second Death.
The Owner is the person who is ordinarily entitled to
exercise the rights under the Policy so long as either of
the Insureds is living. These rights include the power to
select the Beneficiary and the Death Benefit Option. The
Owner generally also has the right to request policy loans,
make partial surrenders or surrender the Policy. The Owner
may also name a new owner, assign the Policy or agree not to
exercise all of the Owner's rights under the Policy.
If the Owner is a person other than the last surviving
Insured, and that Owner dies before the Second Death, the
Owner's rights in the Policy will belong to the Owner's
estate, unless otherwise specified to LLANY.
BENEFICIARY
The Beneficiary is designated by the Owner or the Applicant
and is the person who will receive the Death Benefit
proceeds payable under the Policy. The person or persons
named in the application as Beneficiary are the
Beneficiaries of the Death Benefit under the Policy.
Multiple Beneficiaries will be paid in equal shares, unless
otherwise specified to LLANY.
Except when LLANY has acknowledged an assignment of the
Policy or an agreement not to change the Beneficiary, the
Owner may change the Beneficiary at any time while either of
the Insureds is living. Any request for a change in the
Beneficiary must be in a written form satisfactory to LLANY
and submitted to LLANY. Unless the Owner has reserved the
right to change the Beneficiary, such a request must be
signed by both the Owner and the Beneficiary. On
recordation, the change of Beneficiary will be effective as
of the date of signature or, if there is no such date, the
date recorded. No change of Beneficiary will affect, or
prejudice LLANY as to, any payment made or action taken by
LLANY before it was recorded.
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If any Beneficiary dies before the Second Death, the
Beneficiary's potential interest shall pass to any surviving
Beneficiaries, unless otherwise specified to LLANY. If no
named Beneficiary survives the Second Death, any Death
Benefit Proceeds will be paid to the Owner or the Owner's
executor, administrator or assignee.
INSUREDS
There are two Insureds under the Policy. At the Date of
Issue of the Policy the Owner must have an insurable
interest in each of the Insureds. On the Second Death, a
Death Benefit is payable under the Policy.
THE POLICY
The Policy is the life insurance contract described in this
Prospectus. The Date of Issue is the date on which LLANY
begins life insurance coverage under a Policy. A Policy Year
is each twelve month period, beginning with the Date of
Issue, during which the Policy is in effect. The Policy
Anniversary is the day of the year the Policy was issued.
On issuance, a Policy will be delivered to the Owner. The
Policy sets forth the terms of the Policy, as applicable to
the Owner, and should be reviewed by the Owner on receipt to
confirm that it sets forth the features specified in the
application. The ownership and other options set forth in
the Policy are registered, and may be transferred, solely on
the books and records of LLANY. Possession of the Policy
does not represent ownership or the right to exercise the
incidents of ownership with respect to the Policy. If the
Owner loses the form of Policy, LLANY will issue a
replacement on request. LLANY may impose a Policy
replacement fee.
POLICY SPECIFICATIONS
The Policy includes a Policy Specifications page, with
supporting schedules, in which is set forth certain
information applicable to the specific Policy. This
information includes the identity of the Owner, the Date of
Issue, the Initial Specified Amount, the Death Benefit
Option selected, the Insureds, the issue Ages, the
Beneficiary, the initial Premium Payment, the Surrender
Charges, Expense Charges and Fees, Guarantee Maximum Cost of
Insurance Rates.
PREMIUM FEATURES
The Policy permits flexible premium payments, meaning that
the Owner may select the frequency and the amount of Premium
Payments. After the Initial Premium Payment is paid there is
no minimum premium required. The initial Premium Payment is
due on the Effective Date (the date on which the initial
premium is applied to the Policy) and must be equal to or
exceed the amount necessary to provide for two Monthly
Deductions.
PLANNED PREMIUMS; ADDITIONAL PREMIUMS
"Planned Premiums" are the amount of premium (as shown in
the Policy Specifications) the applicant chooses to pay
LLANY on a scheduled basis. This is the amount for which
LLANY sends a premium reminder notice.
Any subsequent Premium Payments (Additional Premiums) must
be sent directly to the Administrative Office. Additional
Premiums will be credited only when actually received by
LLANY. Planned Premiums may be billed with an annual,
semiannual, or quarterly frequency. Pre-authorized automatic
additional premium payments can also be arranged at any
time.
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Unless specifically otherwise directed, any payment received
(other than any Premium Payment necessary to prevent, or
cure, Policy lapse) will be applied first to reduce Policy
indebtedness. There is no premium load on such payments to
the extent applied to reduce indebtedness.
LIMITS ON RIGHT TO MAKE PAYMENTS OF ADDITIONAL AND PLANNED
PREMIUMS
The Owner may increase Planned Premiums, or pay Additional
Premiums, subject to the following limitations and LLANY's
right to limit the amount or frequency of Additional
Premiums.
LLANY may require evidence of insurability if any payment of
Additional Premium (including Planned Premium) would
increase the difference between the Death Benefit and the
Accumulation Value. If LLANY is unwilling to accept the
risk, the increase in premium will be refunded without
interest and without participation of such amounts in any
underlying investment.
LLANY may also decline any Additional Premium (including
Planned Premium) or a portion thereof that would result in
total Premium Payments exceeding the maximum limitation for
life insurance under federal tax laws. The excess amount
would be returned.
PREMIUM LOAD; NET PREMIUM PAYMENT
We deduct a maximum of 8% up-front from each Premium Payment
during the first 15 years and a maximum of 5% up-front
thereafter. This amount, sometimes referred to as premium
load, covers certain Policy-related state tax and federal
income tax liabilities and a portion of the sales expenses
incurred by LLANY. The Premium Payment, net of the premium
load, is called the "Net Premium Payment."
RIGHT-TO-EXAMINE PERIOD
The Owner may return the Policy to LLANY for cancellation as
follows. If the Owner mails or delivers the Policy to the
Administrative Office on or before 10 days after delivery of
the Policy (60 days for Policies issued in replacement of
other insurance) and notice of surrender rights to the
Owner, (Right-to-Examine Period) LLANY will refund to the
Owner all Premium Payments.
Any Premium Payments received by LLANY before the end of the
Right-to-Examine Period will be held in the Money Market
Sub-Account, and will be allocated to the Sub-Accounts
designated by the Owner at the end of a Right-to-Examine
Period. If the Policy is returned for cancellation within
the Right-to-Examine Period, we will return any Premium
Payments within seven days, although any refund of a Premium
Payment made by check may be delayed until the check clears.
TRANSFERS AND ALLOCATION AMONG ACCOUNTS
ALLOCATION OF NET PREMIUM PAYMENTS
The allocation of Net Premium Payments among the Fixed
Account and the Sub-Accounts may be set forth in the
application. An Owner may change the allocation of future
Net Premium Payments at any time. In any allocation, the
amount allocated to any Sub-Account must be in whole
percentages. No allocation can be made which would result in
a Sub-Account Value of less than $50 or a Fixed Account
Value of less than $2,500. LLANY, at its sole discretion,
may waive minimum balance requirements on the Sub-Accounts.
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TRANSFERS
The Owner may make transfers among the Sub-Accounts, on the
terms set forth below, at any time before the younger
Insured reaches or would have reached Age 100. The Owner
should carefully consider current market conditions and each
Sub-Account's investment policies and related risks before
allocating money to the Sub-Accounts.
Transfer of amounts of at least $500 from one Sub-Account to
another or from the Sub-Accounts to the Fixed Account are
possible at any time. Within 30 days after each anniversary
of the Date of Issue, the Owner may transfer up to the
lesser of (a) 25% of the Fixed Account Value (as of the
preceding anniversary of the Date of Issue) or (b) $250,000
to one or more Sub-Accounts. Up to 12 transfer requests (a
request may involve more than a single transfer) may be made
in any Policy Year without charge, and any value remaining
in a Sub-Account after a transfer must be at least $500.
LLANY reserves the right to impose a charge for each
transfer request in excess of 12 requests in any Policy
Year. LLANY may further limit transfers from the Fixed
Account at any time.
Transfers must be made in proper written form, unless the
Owner has given written authorization to LLANY to accept
telephone transactions. Contact our Administrative Office
for authorization forms and information on permitted
telephone transactions. Written transfer requests or
adequately authenticated telephone transfer requests
received at the Administrative Office by the close of the
New York Stock Exchange (usually 4:00 PM ET) on a Valuation
Day will be effected as of that day. Otherwise, requests
will be effective as of the next Valuation Day.
Any transfer among the Sub-Accounts or to the Fixed Account
will result in the crediting and cancellation of
Accumulation Units based on the Accumulation Unit values
next determined after the Administrative Office receives a
request in proper written form or adequately authenticated
telephone transfer requests. Any transfer made which causes
the remaining value of Accumulation Units for a Sub-Account
or the Fixed Account to be less than $500 will result in
those remaining Accumulation Units being canceled and their
aggregate value reallocated proportionately among the other
Sub-Accounts and the Fixed Account to which Policy values
are then allocated.
OPTIONAL SUB-ACCOUNT ALLOCATION PROGRAMS
The Owner may elect to participate in programs providing for
Dollar Cost Averaging or Automatic Rebalancing, but may
participate in only one program at any time.
DOLLAR COST AVERAGING
Dollar Cost Averaging systematically transfers specified
dollar amounts from the Money Market Sub-Account. Transfer
allocations may be made to one or more of the Sub-Accounts
on a monthly or quarterly basis. These transfers do not
count against the free transfers available. By making
allocations on a regularly scheduled basis, instead of on a
lump sum basis, an Owner may reduce exposure to market
volatility. Dollar Cost Averaging will not assure a profit
or protect against a declining market.
If the Owner elects Dollar Cost Averaging, the value in the
Money Market Sub-Account must be at least $1,000 initially.
The minimum amount that may be allocated is $50 monthly.
An election for Dollar Cost Averaging is effective after the
Administrative Office receives a request from the Owner in
proper written form or by telephone, if adequately
authenticated. An election is effective within ten business
days, but only if there is sufficient value in the Money
Market Sub-Account. LLANY may, in its sole discretion, waive
Dollar Cost Averaging minimum deposit and transfer
requirements.
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Dollar Cost Averaging terminates automatically: (1) if the
number of designated transfers has been completed; (2) if
the value in the Money Market Sub-Account is insufficient to
complete the next transfer; (3) within one week after the
Administrative Office receives a request for termination in
proper written form or by telephone, if adequately
authenticated; or (4) if the Policy is surrendered.
Currently, there is no charge for Dollar Cost Averaging, but
LLANY reserves the right to impose a charge.
AUTOMATIC REBALANCING
Automatic Rebalancing periodically restores to a
pre-determined level the percentage of Policy value
allocated to each Sub-Account (e.g. 20% Money Market,
50% Growth, 30% Utilities). The Fixed Account is not subject
to rebalancing. The pre-determined level is the allocation
initially selected on the application, until changed by the
Owner. If Automatic Rebalancing is elected, all Net Premium
Payments allocated to the Sub-Accounts will be subject to
Automatic Rebalancing.
The Owner may select Automatic Rebalancing on a quarterly,
semi-annual or annual basis. Automatic Rebalancing may be
elected, terminated or the allocation may be changed at any
time, effective within ten business days upon receipt by the
Administrative Office of a request in proper written form or
by telephone, if adequately authenticated.
Currently, there is no current charge for Automatic
Rebalancing, but LLANY reserves the right to impose a
charge.
POLICY VALUES
The "Accumulation Value" is the sum of the Fixed Account
Value, Separate Account Value and the Loan Account Value.
The Accumulation Value of the Policy depends on the
performance of the underlying investments. Policy values are
used to fund Policy fees and expenses, including the Cost of
Insurance. Premium Payments to meet your objectives will
vary based on the investment performance of the underlying
investments. A market downturn, affecting the Sub-Accounts
upon which the Accumulation Value of a particular Policy
depends, may require additional premium payments beyond
those expected to maintain the level of coverage or to avoid
lapse of the Policy. We strongly suggest you review periodic
statements to see if additional premium payments must be
made to avoid lapse of the Policy.
We will tell you at least annually the Accumulation Value,
the number of Accumulation Units which remain credited to
the Policy, the current Accumulation Unit values, the
Sub-Account values, the Fixed Account Value and the Loan
Account Value.
ACCUMULATION VALUE
The portion of a Premium Payment, after the deduction for
the premium load, is the "Net Premium Payment." It is the
Net Premium Payment that is available for allocation to the
Fixed Account or the Sub-Accounts.
We credit a Net Premium Payment to the Policy as of the end
of the Valuation Period in which it is received at the
Administrative Office. The Valuation Period is the time
between Valuation Days, and a Valuation Day is every day on
which the New York Stock Exchange is open and trading
unrestricted. Accumulation Units are valued on every
Valuation Day.
The Accumulation Value of a Policy is determined by:
(1) multiplying the total number of Accumulation Units
credited to the Policy for each Sub-Account by its
appropriate
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current Accumulation Unit Value; (2) if a combination of
Sub-Accounts is elected, totaling the resulting values; and
(3) adding any values attributable to the Fixed Account and
the Loan Account. The Accumulation Value will be affected by
Monthly Deductions.
SEPARATE ACCOUNT VALUE
The Separate Account Value is the portion of the
Accumulation Value attributable to the Separate Account.
ACCUMULATION UNIT VALUE
All or a part of a Net Premium Payment allocated to a
Sub-Account is converted into Accumulation Units by dividing
the amount allocated to the Sub-Account by the value of the
Accumulation Unit for the Sub-Account calculated at the end
of the Valuation Period in which it is received at the
Administrative Office. The Accumulation Unit value for each
Sub-Account was initially established at $10.00. It may
thereafter increase or decrease from one Valuation Period to
the next. Allocations to Sub-Accounts are made only as of
the end of a Valuation Day.
ACCUMULATION UNITS
An Accumulation Unit is a unit of measure used in the
calculation of the value of each Sub-Account. The
Accumulation Unit value will be as determined for the
Valuation Period during which a Premium Payment or request
for transfer is received by LLANY. The Accumulation Unit
value for a Sub-Account for any later Valuation Period is
determined as follows:
1.The total value of Fund shares held in the Sub-Account
is calculated by multiplying the number of Fund shares
owned by the Sub-Account at the beginning of the
Valuation Period by the net asset value per share of
the Fund at the end of the Valuation Period, and adding
any dividend or other distribution of the Fund if an
ex-dividend date occurs during the Valuation Period;
minus
2.The liabilities of the Sub-Account at the end of the
Valuation Period; such liabilities include daily
charges imposed on the Sub-Account, and may include a
charge or credit with respect to any taxes paid or
reserved for by LLANY that LLANY determines result from
the operations of the Separate Account; and
3.The result of (2) is divided by the number of
Accumulation Units outstanding at the beginning of the
Valuation Period.
The daily charges imposed on a Sub-Account for any Valuation
Period are equal to the daily mortality and expense risk
charge multiplied by the number of calendar days in the
Valuation Period. The amount of Monthly Deduction allocated
to each Sub-Account will result in the cancellation of
Accumulation Units that have an aggregate value on the date
of such deduction equal to the total amount by which the
Sub-Account is reduced.
The number of Accumulation Units credited to a Policy will
not be changed by any subsequent change in the value of an
Accumulation Unit. Such value may vary from Valuation Period
to Valuation Period to reflect the investment experience of
the Fund used in a particular Sub-Account and fees and
charges under the Policy.
FIXED ACCOUNT AND LOAN ACCOUNT VALUE
The Fixed Account Value and the Loan Account Value reflect
amounts allocated to LLANY's General Account through payment
of premiums or through transfers from the Separate Account.
LLANY guarantees the Fixed Account Value.
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NET ACCUMULATION VALUE
The Net Accumulation Value is the Accumulation Value less
the Loan Account Value. The Net Accumulation Value
represents the net value of the Policy and is the basis for
calculating the Surrender Value.
FUNDS
Each of the Sub-Accounts of the Separate Account is invested
solely in the shares of one of the Funds available under the
Policies. Each of the Funds, in turn, is an investment
portfolio of one of the trusts or corporations listed below.
The portfolios, their investment advisers and distributors,
and the Funds within each that are available under the
Policies are:
AIM VARIABLE INSURANCE FUNDS, managed by A I M
Advisors, Inc., and distributed by A I M Distributors Inc.,
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
AMERICAN FUNDS INSURANCE SERIES (ALSO KNOWN AS AMERICAN
VARIABLE INSURANCE SERIES), managed by Capital Research and
Management Company and distributed by American Funds
Distributors, Inc., 333 South Hope Street, Los Angeles, CA
90071
AFIS Global Small Capitalization Fund -- Class 2
AFIS Growth Fund -- Class 2
AFIS Growth-Income Fund -- Class 2
BARON CAPITAL FUNDS TRUST, managed by BAMCO, Inc. and
distributed by Baron Capital Inc. , 767 Fifth Avenue, New
York, NY 10153
Baron Capital Asset Fund -- Insurance Shares
DELAWARE GROUP PREMIUM FUND, managed by Delaware Management
Company, One Commerce Square, Philadelphia, PA 19103 and for
International and Emerging Markets, Delaware International
Advisers, Ltd., 80 Cheapside, London, England ECV2 6EE, and
distributed by Delaware Distributors, L.P., 1818 Market
Street, Philadelphia, PA 19103
Devon Series -- Standard Class
Emerging Markets Series -- Standard Class
High Yield Series -- Standard Class (formerly Delchester
Series)
REIT Series -- Standard Class
Small Cap Value Series -- Standard Class
Trend Series -- Standard Class
DEUTSCHE ASSET MANAGEMENT VIT FUNDS TRUST (FORMERLY BT
INSURANCE FUNDS TRUST), managed by Bankers Trust Company,
130 Liberty Street (One Bankers Trust Plaza), New York, NY
10006 and distributed by Provident Distributors, Inc., Four
Falls Corporate Center, West Conshohocken PA 19428
EAFE-Registered Trademark- Equity Index Fund
Equity 500 Index Fund
Small Cap Index Fund
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<PAGE>
FIDELITY VARIABLE INSURANCE PRODUCTS FUND, FIDELITY VARIABLE
INSURANCE PRODUCTS FUND II, AND FIDELITY VARIABLE INSURANCE
PRODUCTS FUND III, managed by Fidelity Management & Research
Company and distributed by Fidelity Distributors
Corporation, Inc., 82 Devonshire Street, Boston, MA 02109
Fidelity VIP Growth -- Service Class
Fidelity VIP High Income -- Service Class
Fidelity VIP II Contrafund Portfolio -- Service Class
Fidelity VIP III Growth Opportunities Portfolio --
Service Class
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST,
managed by Templeton Investment Counsel, Inc. Broward
Financial Centre, STE 2100 Fort Lauderdale FL 33394 and its
Templeton and Franklin affiliates and distributed by
Franklin Templeton Distributors, Inc. 777 Mariners Island
Blvd. San Mateo CA 94403-7777
Templeton Growth Securities Fund -- Class 2 (formerly
Templeton Stock Fund)
Templeton International Securities Fund -- Class 2
(formerly Templeton International Fund)
JANUS ASPEN SERIES, managed by Janus Capital and distributed
by Janus Distributors, Inc., 100 Fillmore Street, Denver, CO
80206-4928.
Janus Aspen Series Balanced Portfolio -- Institutional
Shares
Janus Aspen Series Global Technology Portfolio --
Service Shares
Janus Aspen Series Worldwide Growth Portfolio --
Institutional Shares
LINCOLN NATIONAL FUNDS, managed by Lincoln Investment
Management, Inc., 200 East Berry Street, Fort Wayne IN
46802, and distributed by Lincoln Financial
Advisors, Corp., 350 Church Street, Hartford, CT 06103.
Sub-advisors are also noted.
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc. (Sub-advised by Janus
Capital Corp.)
LN Equity-Income Fund, Inc. (Sub-advised by Fidelity
Management Trust Co.)
LN Global Asset Allocation Fund, Inc. (Sub-advised by
Putnam Investment Management, Inc.)
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc. (Sub-advised by Vantage
Investment Advisors Inc.)
Lincoln Investment Management, Inc. (Lincoln Investment) has
informed the funds to which it provides advisory services
that it intends to merge into a newly created series of its
affiliate, Delaware Management Business Trust, during the
second or third quarter of 2000. Lincoln Investment does not
expect the merger to result in any change in the level of
advisory services that it currently provides to these funds,
although there may be some changes in, and additions to,
personnel. See the prospectuses for these funds for more
information.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST, managed
by Massachusetts Financial Services Company and distributed
by MFS Fund Distributors, Inc., 500 Boylston Street, Boston,
MA 02116
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST, managed and
distributed by Neuberger Berman Management Inc., 605 Third
Avenue, 2nd Floor, New York, NY 10158-0006
NB AMT Mid-Cap Growth Portfolio
NB AMT Partners Portfolio
19
<PAGE>
The investment advisory fees charged the Funds by their
advisers are shown listed under "Fund Expenses" in this
Prospectus.
Below is a brief description of the investment objective and
program of each Fund. There can be no assurance that any of
the stated investment objectives will be achieved.
The investment objectives and policies of certain trusts are
similar to the investment objectives and policies of other
funds that may be managed by the same investment adviser.
The investment results of the Trusts, however, may be higher
or lower than the results of such other funds. There can be
no assurance, and no representation is made, that the
investment results of any of the Trusts will be comparable
to the investment results of any other Fund, even if the
other fund has the same investment adviser.
AIM V.I. GROWTH FUND: Seeks growth of capital primarily by
investing in seasoned and better capitalized companies
considered to have strong earnings momentum. Focus is on
companies that have experienced above-average growth in
earnings and have excellent prospects for future growth.
AIM V.I. INTERNATIONAL EQUITY FUND: Seeks to provide
long-term growth of capital by investing in a diversified
portfolio of international equity securities whose issuers
are considered to have strong earnings momentum.
AIM V.I. VALUE FUND: Seeks to achieve long-term growth of
capital by investing primarily in equity securities judged
by its investment advisor to be undervalued relative to the
investment advisor's appraisal of current or projected
earnings of the companies issuing the securities, or
relative to current market values of assets owned by the
companies issuing the securities or relative to the equity
markets generally. Income is a secondary objective.
AFIS GLOBAL SMALL CAPITALIZATION FUND -- CLASS 2: Seeks to
make your investment grow over time by investing primarily
in stocks of smaller companies located around the world that
typically have market capitalization of $50 million to $1.5
billion. The fund is designed for investors seeking capital
appreciation through stocks. Investors in the fund should
have a long-term perspective and be able to tolerate
potentially wide price fluctuations.
AFIS GROWTH FUND -- CLASS 2: Seeks to make you investment
grow over time by investing primarily in common stocks of
companies that appear to offer superior opportunities for
growth of capital. The fund is designed for investors
seeking capital appreciation through stocks. Investors in
the fund should have a long-term perspective and be able to
tolerate potentially wide price fluctuations.
AFIS GROWTH-INCOME FUND -- CLASS 2: Seeks to make your
investment grow and provide you with income over time by
investing primarily in common stocks or other securities
which demonstrate the potential for appreciation and/or
dividends. The fund is designed for investors seeking both
capital appreciation and income.
BARON CAPITAL ASSET FUND -- INSURANCE SHARES: Seeks to
purchase stocks judged by the advisor to have the potential
of increasing their value at least 50% over two subsequent
years, although that goal may not be achieved.
DELAWARE GROUP DEVON SERIES -- STANDARD CLASS: Seeks growth
and income by investing primarily in income-producing stocks
that the manager believes have the potential for
above-average dividend increases over time. This fund blends
traditional growth and value investment styles.
DELAWARE GROUP EMERGING MARKETS SERIES -- STANDARD CLASS:
Seeks long-term growth by investing primarily in stocks of
companies located or operating in emerging or developing
countries.
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<PAGE>
DELAWARE GROUP HIGH YIELD SERIES -- STANDARD CLASS: Seeks
total return and as a secondary objective, high current
income. The Series invests in rated and unrated corporate
bonds, (including high-risk, high yield bonds commonly known
as junk bonds), foreign bonds, U.S. government securities
and commercial paper. An investment in this Series may
involve greater risks than an investment in a portfolio
comprised primarily of investment grade bonds.
DELAWARE GROUP REIT SERIES -- STANDARD CLASS: Seeks to
achieve maximum long-term total return by investing
primarily in the securities of real estate investment trusts
and real estate operating companies.
DELAWARE GROUP SMALL CAP VALUE SERIES -- STANDARD CLASS:
Seeks growth by investing primarily in stocks of small cap
companies whose market values appear low relative to
underlying value or future earnings and growth potential.
DELAWARE GROUP TREND -- STANDARD CLASS: Seeks long-term
growth by investing primarily in stocks of small companies
and convertible securities of emerging and other
growth-oriented companies.
DEUTSCHE VIT EAFE-REGISTERED TRADEMARK- FUND: Seeks to
replicate as closely as possible (before the deduction of
Expenses) the total return of the Europe, Australia, Far
East Index (the EAFE-Registered Trademark- Index), a
capitalization-weighted index containing approximately 1,100
equity securities of companies located outside of the United
States.
DEUTSCHE VIT EQUITY 500 FUND: Seeks to replicate as closely
as possible the performance of the Standard & Poor's 500
Composite Price Index, before the deduction of the Fund
expenses.
DEUTSCHE VIT SMALL CAP INDEX FUND: Seeks to replicate as
closely as possible (before the deduction of expenses) the
total return of the Russell 2000 Small Stock Index (the
"Russell 2000"), an index consisting of approximately 2,000
small capitalization common stocks.
FIDELITY VIP GROWTH PORTFOLIO -- SERVICE CLASS: Seeks
long-term capital appreciation. The portfolio normally
purchases common stocks.
FIDELITY VIP HIGH INCOME PORTFOLIO -- SERVICE CLASS: Seeks
high current income by investing at least 65% of total
assets in income-producing debt securities, with an emphasis
on lower quality securities.
FIDELITY VIP II CONTRAFUND PORTFOLIO -- SERVICE CLASS: Seeks
capital appreciation by investing primarily in securities of
companies whose value the advisor believes is not fully
recognized by the public.
FIDELITY VIP III GROWTH OPPORTUNITIES PORTFOLIO -- SERVICE
CLASS: Seeks capital growth by investing primarily in common
stocks.
JANUS ASPEN SERIES BALANCED PORTFOLIO -- INSTITUTIONAL
SHARES: Seeks long term growth of capital, consistent with
the preservation of capital and balanced by current income.
The Portfolio normally invests 40-60% of its assets in
securities selected primarily for their growth potential and
40-60% of its assets in securities selected primarily for
their income potential.
JANUS ASPEN SERIES GLOBAL TECHNOLOGY -- SERVICE SHARES:
Seeks long-term growth of capital. The Portfolio invests
primarily in equity securities of U.S. and foreign
companies, selected for their growth potential. Normally, it
invests at least 65% of its total assets in securities or
companies that the portfolio manager believes will benefit
significantly from advancements or improvements in
technology.
JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO --
INSTITUTIONAL SHARES: Seeks long-term growth of capital in a
manner consistent with the preservation of capital by
investing primarily in common stocks of companies of any
size throughout the world.
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<PAGE>
The Portfolio normally invests in insurers from at least 5
different countries, including the U.S. The Portfolio may at
times invest in fewer than five countries or even a single
country.
LINCOLN NATIONAL BOND FUND: Seeks maximum current income
consistent with prudent investment strategy. The fund
invests primarily in medium-and long-term corporate and
government bonds.
LINCOLN NATIONAL CAPITAL APPRECIATION FUND: Seeks long-term
growth of capital in a manner consistent with preservation
of capital. The fund primarily buys stocks in a large number
of companies of all sizes if the companies are competing
well and if their products and services are in high demand.
It may also buy some money market securities and bonds,
including junk (high risk) bonds.
LINCOLN NATIONAL EQUITY-INCOME FUND: Seeks reasonable income
by investing primarily in income-producing equity
securities. The fund invests mostly in high-income stocks
with some high-yielding bonds (including junk bonds).
LINCOLN NATIONAL GLOBAL ASSET ALLOCATION FUND: Seeks
long-term total return consistent with preservation of
capital. The fund allocates its assets among several
categories of equity and fixed-income securities, both of
U.S. and foreign insurers.
LINCOLN NATIONAL MONEY MARKET FUND: Seeks maximum current
income consistent with the preservation of capital. The fund
invests in short term obligations issued by U.S.
corporations, the U.S. government, and federally-chartered
banks and U.S. branches of foreign banks.
LINCOLN NATIONAL SOCIAL AWARENESS FUND: Seeks to achieve
long-term capital appreciation, by investing in stocks of
established companies which adhere to certain specific
social criteria.
MFS EMERGING GROWTH SERIES: Seeks to provide long-term
growth of capital.
MFS TOTAL RETURN SERIES: Seeks primarily to provide
above-average income (compared to a portfolio invested
entirely in equity securities) consistent with the prudent
employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
MFS UTILITIES SERIES: Seeks capital growth and current
income (income above that available from a portfolio
invested entirely in equity securities).
NB AMT MID-CAP GROWTH PORTFOLIO: Seeks capital appreciation
by investing primarily in common stocks of
medium-capitalization companies, using a growth-oriented
investment approach.
NB AMT PARTNERS PORTFOLIO: Seeks capital growth by investing
mainly in common stocks of mid- to large capitalization
established companies using the value-oriented investment
approach. Neuberger Berman Management Inc. serves as the
Fund's investment adviser. Neuberger Berman, LLC serves as
the Fund's investment sub-adviser.
TEMPLETON GROWTH SECURITIES FUND -- CLASS 2 (FORMERLY
TEMPLETON STOCK FUND): Seeks long-term capital growth.
Invests primarily in stocks of companies in various nations
throughout the world including the U.S. and emerging
markets. Templeton Investment Counsel, Inc. serves as the
Fund's investment advisor.
TEMPLETON INTERNATIONAL SECURITIES FUND -- CLASS 2 (FORMERLY
TEMPLETON INTERNATIONAL FUND): Seeks long-term capital
growth. It invests primarily in stocks of companies outside
the United States, including emerging markets. Templeton
Investment Counsel, Inc. serves as Fund's investment
advisor.
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<PAGE>
Several of the Funds may invest in non-investment grade,
high-yield, high-risk debt securities (commonly referred to
as "junk bonds"), as detailed in the individual Fund
Prospectuses. Please review the Fund prospectuses carefully.
There is no assurance that the investment objective of any
of the Funds will be met. You assume all of the investment
performance risk for the Sub-Accounts you select. There is
investment performance risk in each of the Sub-Accounts,
although the amount of such risk varies significantly among
the Sub-Accounts. Owners should read each Fund's prospectus
carefully and understand the risks before making or changing
investment choices. Additional Funds may, from time to time,
be made available as underlying investments, with prior
approval of the New York Insurance Department. The right to
select among Funds will be limited by the terms and
conditions imposed by LLANY (SEE ALLOCATION OF NET PREMIUM
PAYMENTS).
SUBSTITUTION OF SECURITIES
If the shares of any Fund should no longer be available for
investment by the Separate Account or if, in the judgment of
LLANY, further investment in such shares should cease to be
appropriate in view of the purpose of the Separate Account
or in view of legal, regulatory or federal income tax
restrictions, LLANY may substitute shares of another Fund. A
substituted fund may have higher charges than the one it
replaces. There will be no substitution of securities in any
Sub-Account without prior approval of the Securities and
Exchange Commission.
VOTING RIGHTS
LLANY will vote the shares of each Fund held in the Separate
Account at special meetings of the shareholders of the
particular Fund in accordance with instructions received by
the Administrative Office in proper written form from
persons having a voting interest in the Separate Account.
LLANY will vote shares for which it has not received
instructions in the same proportion as it votes shares in
the Separate Account for which it has received instructions.
The Funds do not hold regular meetings of shareholders.
To determine how many votes each Policyowner is entitled to
direct with respect to a Fund, first LLANY will calculate
the dollar amount of your account value attributable to that
Fund. Second we will divide that amount by $100.00. The
result is the number of votes you may direct.
The number of shares which a person has a right to vote will
be determined as of a date to be chosen by the appropriate
Trust not more than sixty (60) days prior to the meeting of
the particular Fund. Voting instructions will be solicited
by written communication at least fourteen (14) days prior
to the meeting.
FUND PARTICIPATION AGREEMENTS
LLANY has entered into agreements with the various Trusts
and their advisers or distributors under which LLANY makes
the Funds available under the Policies and performs certain
administrative services. In some cases, the advisers or
distributors may compensate LLANY at annual rates of between
.10% and .25% of assets in a particular Fund attributable to
the Policies.
CHARGES AND FEES
LLANY deducts charges in connection with the Policy to
compensate it for providing the insurance benefit set forth
in the Policy, administering the Policy, assuming certain
risks in connection with the Policy and for incurring
expenses associated with the distribution of the Policy.
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<PAGE>
The nature and amount of these charges are as follows:
PREMIUM LOAD; NET PREMIUM PAYMENT
We deduct a maximum of 8% up-front from each premium payment
during the first 15 years and a maximum of 5% up-front
thereafter. This amount, sometimes referred to as "premium
load," covers certain Policy-related state tax and federal
income tax liabilities and a portion of the sales expenses
incurred by Lincoln Life. The Premium Payment, net of the
premium load, is called the "Net Premium Payment."
DEDUCTIONS MADE MONTHLY
We make various expense deductions monthly. The Monthly
Deduction, including the Cost of Insurance Charge and
charges for supplemental riders or benefits, if any, is made
from the Net Accumulation Value.
The Monthly Deductions are deducted proportionately from the
value of each underlying investment subject to the charge.
In the case of Sub-Accounts, Accumulation Units are canceled
and the value of the canceled Accumulation Units is
withdrawn in the same proportion as their respective values
have to the Net Accumulation Value. The Monthly Deductions
are made on the Monthly Anniversary Day starting on the Date
of Issue. The Monthly Anniversary Day under the Policy is
the same day of each month as the Date of Issue, provided
that if there is no such date in a given month, it is the
first Valuation Day of the next month. If the day that would
otherwise be a Monthly Anniversary Day is not a Valuation
Day, then the Monthly Anniversary Day is the next Valuation
Day.
If the Net Accumulation Value is insufficient to cover the
current Monthly Deduction, you have a 61-day period (Grace
Period) to make a payment sufficient to cover that
deduction. (See "LAPSE AND REINSTATEMENT.")
MONTHLY DEDUCTION
You will be charged a monthly maximum charge of $0.15 per
$1,000 of Initial Specified Amount for the first 120 months
from issue date or from the date of an increase in Specified
Amount. If an increase occurs, your current insurance age
will be your issue age for the new coverage. You will be
charged a $10 monthly fee for administrative purposes.
These charges compensate LLANY for administrative expenses
associated with Policy issue and ongoing Policy maintenance
including premium billing and collection, policy value
calculation, confirmations, periodic reports and other
similar matters.
COST OF INSURANCE CHARGE
The "Cost of Insurance" charge is the portion of the Monthly
Deduction designed to compensate LLANY for the anticipated
cost of paying Death Benefits in excess of the Accumulation
Value, not including riders, supplemental benefits or
monthly expense charges.
The Cost of Insurance charge depends on the Age (the age of
the subject person at his/ her nearest birthday),
underwriting category and gender (in accordance with state
law) of both Insureds and the current "Net Amount at Risk"
(Death Benefit minus the Accumulation Value). The rate on
which the Monthly Deduction for the Cost of Insurance is
based will generally increase as the Insureds age, although
the Cost of Insurance charge could decline if the Net Amount
at Risk drops relatively faster than the Cost of Insurance
Rate increases.
The Cost of Insurance charge is determined by dividing the
Death Benefit at the previous Monthly Anniversary Day by
1.0032737 (the monthly equivalent of an annual
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<PAGE>
rate of 4%), subtracting the Accumulation Value at the
previous Monthly Anniversary Day, and multiplying the result
(the Net Amount at Risk) by the applicable Cost of Insurance
Rate as determined by LLANY. The Guaranteed Maximum Cost of
Insurance Rates, per $1,000 of Net Amount at Risk, for
standard risks are based on the 1980 Commissioners Standard
Ordinary Mortality Tables, Age Nearest Birthday (1980 CSO,
Male or Female); or, for unisex rates, on the 1980 CSO-B
Table.
MORTALITY AND EXPENSE RISK CHARGE
LLANY deducts a daily mortality and expense risk charge as a
percentage of the assets of the Separate Account. The
mortality risk assumed is that insureds may live for a
shorter period than estimated, and therefore, a greater
amount of death benefit will be payable. The expense risk
assumed is that expenses incurred is issuing and
administering the policies will be greater than estimated.
The mortality and expense risk charge is currently at an
annual rate of 0.80%, and guaranteed not to exceed that.
SURRENDER CHARGES
A generally declining Surrender Charge will apply if the
Policy is totally surrendered or lapses during the first
fifteen years following the Date of Issue or the first
fifteen years following an increase in Specified Amount. The
Surrender Charge varies by Age of the Insureds, the number
of years since the Date of Issue, and Specified Amount. The
charge is in part a deferred sales charge and in part a
recovery of certain first year administrative costs. The
maximum Surrender Charge is included in each Policy and is
in compliance with state nonforfeiture law. Examples of the
Surrender Charge can be seen in Appendix 1 by subtracting
"Surrender Value" from "Total Accumulation Value" on any
chosen set of investment return assumptions.
The Surrender Charge under a Policy is proportional to the
face amount of the Policy. Expressed as a percentage of face
amount, it is higher for older than for younger issue ages.
For example, assuming issue ages 80 (the oldest possible
issue ages for a Policy), the first year Surrender Charge is
$37.40 per $1000 of face amount. At issue ages 65 it is
$25.10 per $1000 of face amount, at issue ages 55 it is
$13.68 per $1000 of face amount, and at issue ages 25 it is
$2.87 per $1000 of face amount. These calculations assume
both insureds are the same age. The Surrender Charge cannot
exceed Policy value but may equal Policy Value, especially
during the first two Policy Years. All Surrender Charges
decline to zero over the 15 years following issuance of the
Policy. See, for example, the illustrations in Appendix 1
for issue ages 55 and 65.
If the Specified Amount is increased, a new Surrender Charge
will be applicable, in addition to any existing Surrender
Charge. The Surrender Charge applicable to the increase
would be equal to the Surrender Charge on a new Policy whose
Specified Amount was equal to the amount of the increase.
Supplemental Policy Specifications will be sent to the Owner
upon an increase in Specified Amount reflecting the maximum
additional Surrender Charge in the Table of Surrender
Charges. The minimum allowable increase in Specified Amount
is $1,000. LLANY may change this at any time.
If the Specified Amount is decreased while the Surrender
Charge applies, the Surrender Charge will remain the same.
No Surrender Charge is imposed on a partial surrender, but
an administrative fee of $25 (not to exceed 2% of the amount
surrendered) is imposed, allocated pro-rata among the
Sub-Accounts from which the partial surrender proceeds are
taken.
Any surrenders, full or partial, may result in tax
implications. (SEE TAX ISSUES)
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Based on its actuarial determination, LLANY does not
anticipate that the Surrender Charge, together with the
portion of the premium load attributable to sales expense,
will cover all sales and administrative expenses which LLANY
will incur in connection with the Policy. Any such
shortfall, including but not limited to payment of sales and
distribution expenses, would be available for recovery from
the general account of LLANY, which supports insurance and
annuity obligations.
TRANSACTION FEE FOR EXCESS TRANSFERS
LLANY reserves the right to impose a charge for each
transfer request in excess of 12 in any Policy Year. A
single transfer request may consist of multiple
transactions.
DEATH BENEFITS
The Death Benefit Proceeds is the amount payable to the
Beneficiary upon the Second Death (the death of the second
of the two Insureds to die), in accordance with the Death
Benefit Option elected. Loans (if any) and overdue
deductions are deducted from the Death Benefit Proceeds
prior to payment.
The applicant must select the Specified Amount of the Death
Benefit, which may not be less than $250,000 and the Death
Benefit Option. The two Death Benefit Options are described
below. The applicant must consider a number of factors in
selecting the Specified Amount, including the amount of
proceeds required on the Second Death and the Owner's
ability to make Premium Payments. In evaluating this
decision, the applicant should consider that the greater the
Net Amount at Risk, the greater the monthly deductions for
the Cost of Insurance.
DEATH BENEFIT OPTIONS
Two different Death Benefit Options are available under the
Policy. The Death Benefit Proceeds payable under the Policy
is the greater of (a) the Corridor Death Benefit or (b) the
amount determined under the Death Benefit Option in effect
on the date of the Second Death, less (in each case) any
indebtedness under the Policy. In the case of Death Benefit
Option 1, the Specified Amount is reduced by the amount of
any partial surrender. The Corridor Death Benefit is the
applicable percentage (the Corridor Percentage) of the
Accumulation Value (rather than by reference to the
Specified Amount) required to maintain the Policy as a "life
insurance contract" for Federal income tax purposes. The
Corridor Percentage is 250% through the time the younger
Insured reaches or would have reached Age 40 and decreases
in accordance with the table in Appendix 2 of this
Prospectus to 100% when the younger Insured reaches or would
have reached Age 95.
Death Benefit Option 1 provides Death Benefit Proceeds equal
to the Specified Amount (a minimum of $250,000). If Option 1
is selected, the Policy pays level Death Benefit Proceeds
until the Minimum Death Benefit exceeds the Specified
Amount. (See "DEATH BENEFITS," "FEDERAL INCOME TAX
DEFINITION OF LIFE INSURANCE.")
Death Benefit Option 2 provides Death Benefit Proceeds equal
to the sum of the Specified Amount plus the Accumulation
Value as of the date of the Second Death. If Option 2 is
selected, the Death Benefit Proceeds increase or decrease
over time, depending on the amount of premium paid and the
investment performance of the underlying Sub-Accounts.
If for any reason the applicant fails to affirmatively elect
a particular Death Benefit Option, Death Benefit Option 1
shall apply until changed as provided below. The ability
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of the Owner to support the Policy is an important factor in
selecting between the Death Benefit Options, because the
greater the Net Amount at Risk at any time, the more that
will be deducted from the value of the Policy to pay the
Cost of Insurance.
Owners who prefer insurance coverage that generally does not
vary in amount and generally has lower Cost of Insurance
Charges should elect Option 1. Owners who prefer to have
favorable investment experience reflected in increased
insurance coverage should select Option 2. Under Option 1,
any Surrender Value at the time of the Second Death will
revert to LLANY.
CHANGES IN DEATH BENEFIT OPTIONS AND SPECIFIED AMOUNT
All requests for changes between Death Benefit Options and
changes in the Specified Amount must be submitted in proper
written form to the Administrative Office. The minimum
amount of increase in Specified Amount currently permitted
is $1,000. If requested, a supplemental application and
evidence of insurability must also be submitted to LLANY.
In a change from Death Benefit Option 1 to Death Benefit
Option 2, the Specified Amount shall be reduced so it
thereafter equals (a) the amount payable under the Death
Benefit Option in effect immediately before the change,
minus (b) the Accumulation Value immediately before the
change. In a change from Death Benefit Option 2 to Death
Benefit Option 1, the Specified Amount shall be increased so
that it thereafter equals the amount payable under the Death
Benefit Option in effect immediately before the change.
Any reductions in Specified Amount will be made against the
initial Specified Amount and any later increase in the
Specified Amount on a last in, first out basis. Any increase
in the Specified Amount will increase the amount of the
Surrender Charge applicable to the Policy.
LLANY may at its discretion decline any request for a change
between Death Benefit Options or increase in the Specified
Amount. LLANY may at its discretion decline any request for
change of the Death Benefit Option or reduction of the
Specified Amount if, after the change, the Specified Amount
would be less than the minimum Specified Amount or would
reduce the Specified Amount below the level required to
maintain the Policy as life insurance for purposes of
Federal income tax law.
Any change is effective on the first Monthly Anniversary Day
on or after the date of approval of the request by LLANY,
unless the Monthly Deduction Amount would increase as a
result of the change. In that case, the change is effective
on the first Monthly Anniversary Day on which the
Accumulation Value is equal to or greater than the Monthly
Deduction Amount, as increased.
FEDERAL INCOME TAX DEFINITION OF LIFE INSURANCE
The amount of the Death Benefit must satisfy certain
requirements under the Code if the policy is to qualify as
insurance for federal income tax purposes. The amount of the
Death Benefit Proceeds required to be paid under the Code to
maintain the Policy as life insurance under each of the
Death Benefit Options is equal to the product of the
Accumulation Value and the applicable Corridor Percentage. A
table of Corridor Percentages is in Appendix 2.
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NOTICE OF DEATH OF INSUREDS
Due Proof of Death must be furnished to LLANY at the
Administrative Office as soon as reasonably practicable
after the death of each Insured. Due Proof of Death must be
in proper written form and includes a certified copy of an
official death certificate, a certified copy of a decree of
a court of competent jurisdiction as to the finding of
death, or any other proof of death satisfactory to LLANY.
PAYMENT OF DEATH BENEFIT PROCEEDS
The Death Benefit Proceeds under the Policy will ordinarily
be paid within seven days, if in a lump sum, or in
accordance with any Settlement Option selected by the Owner
or the Beneficiary after receipt at the Administrative
Office of Due Proof of Death of both Insureds. The amount of
the Death Benefit Proceeds under Option 2 will be determined
as of the date of the Second Death. Payment of the Death
Benefit Proceeds may be delayed if the Policy is contested
or if Separate Account values cannot be determined.
SETTLEMENT OPTIONS
There are several ways to which the Beneficiary may receive
the Death Benefit Proceeds or the Owner may choose to
receive payments upon surrender of the Policy.
The Owner may elect a Settlement Option before the Second
Death; after the Second Death, if the Owner has not
irrevocably selected a Settlement Option, the Beneficiary
may elect one of the Settlement Options. If no Settlement
Option is selected, the Death Benefit Proceeds will be paid
in a lump sum.
If the Policy is assigned as collateral security, LLANY will
pay any amount due the assignee in one lump sum. Any
remaining Death Benefit Proceeds will be paid as elected.
A request to elect, change, or revoke a Settlement Option
must be received in proper written form by the
Administrative Office before payment of the lump sum or
under any Settlement Option. The first payment under the
Settlement Option selected will become payable on the date
proceeds are settled under the option. Payments after the
first payment will be made on the first day of each month.
Once payments have begun, the Policy cannot be surrendered
and neither the payee nor the Settlement Option may be
changed.
There are at least four Settlement Options:
The first Settlement Option is an annuity for the
lifetime of the payee.
The second Settlement Option is an annuity for the
lifetime of the payee, with monthly payments guaranteed
for 60, 120, 180, or 240 months.
Under the third Settlement Option, LLANY makes monthly
payments for a stated number of years, at least five but
no more than thirty.
The fourth Settlement Option, provides that LLANY pays
interest annually on the sum left with LLANY at a rate
of at least 3% per year, and pays the amount on deposit
on the payee's death.
Any other Settlement Option offered by LLANY at the time of
election may also be selected.
POLICY LIQUIDITY
The Policy provides only limited liquidity. Subject to
certain limitations, however, the Owner may borrow against
the Surrender Value of the Policy, may make a partial
surrender of some of the Surrender Value of the Policy and
may fully surrender the Policy for its Surrender Value.
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POLICY LOANS
The Owner may at any time contract for Policy Loans up to an
aggregate amount not to exceed 90% of the Surrender Value at
the time a Policy Loan is made. It is a condition to
securing a Policy Loan that the Owner execute a loan
agreement and that the Policy be assigned to LLANY free of
any other assignments. The Loan Account is the account in
which Policy indebtedness (outstanding loans and interest)
accrues once it is transferred out of the Fixed Account or
the Sub-Accounts. Interest on Policy Loans accrues at an
annual rate of 8%, and loan interest is payable to LLANY
(for its account) once a year in arrears on each Policy
Anniversary, or earlier upon full surrender or other payment
of proceeds of a Policy.
The amount of a loan, plus any accrued but unpaid interest,
is added to the outstanding Policy Loan balance. Unless paid
in advance, any loan interest due will be transferred from
the values in the Fixed Account and each Sub-Account, and
treated as an additional Policy Loan, and added to the Loan
Account Value.
We pay interest to your Loan Account value, during the first
ten Policy Years, at an annual rate equal to the interest
rate you must pay on your loan, minus one percent. This is
the "loan spread", and we guarantee it will not exceed 2%
per year for Policy Years one through ten. For the eleventh
and subsequent Policy Years our current practice is to
credit interest at an annual rate equal to your loan rate.
We guarantee the loan spread in Policy Years eleven and
thereafter will never exceed 1%.
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts (including for this purpose the
Fixed Account), transfers from each for loans and loan
interest will be made in proportion to the assets in each
such Sub-Account at that time, unless LLANY is instructed
otherwise in proper written form at the Administrative
Office. Repayments on the loan and interest credited on the
Loan Account Value will be allocated according to the most
recent Premium Payment allocation at the time of the
repayment.
A Policy Loan, whether or not repaid, affects the proceeds
payable upon the Second Death and the Accumulation Value.
The longer a Policy Loan is outstanding, the greater the
effect is likely to be. While an outstanding Policy Loan
reduces the amount of assets invested, depending on the
investment results of the Sub-Accounts, the effect could be
favorable or unfavorable.
If at any time the total indebtedness against the Policy,
including interest accrued but not due, equals or exceeds
the then current Accumulation Value less Surrender Charges,
the Policy will terminate without value subject to the
conditions in the Grace Period Provision. (See "LAPSE AND
REINSTATEMENT.")
If a Policy lapses while a loan is outstanding, adverse tax
consequences may result.
PARTIAL SURRENDER
You may make a partial surrender at any time before the
Second Death by request to the Administrative Office in
proper written form or by telephone, if you have authorized
telephone transactions. For each partial surrender we charge
a transaction fee of $25 or 2% of the amount surrendered,
whichever is less. Total partial surrenders may not exceed
90% of the Surrender Value of the Policy. Each partial
surrender may not be less than $500. Partial surrenders are
subject to other limitations as described below.
Partial surrenders may reduce the Specified Amount and, in
each case, reduce the Death Benefit Proceeds. To the extent
that a requested partial surrender would cause the Specified
Amount to be less than $250,000, the partial surrender will
not be permitted by LLANY. In addition, if following a
partial surrender and the corresponding decrease in
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the Specified Amount, the Policy would not comply with the
maximum premium limitations required by federal tax law, the
surrender may be limited to the extent necessary to meet the
federal tax law requirements.
The effect of partial surrenders on the Death Benefit
Proceeds depends on the Death Benefit Option elected under
the Policy. If Death Benefit Option 1 has been elected, a
partial surrender would reduce the Accumulation Value and
the Specified Amount. The reduction in the Specified Amount,
which would reduce any past increases on a last in, first
out basis, reduces the amount of the Death Benefit Proceeds.
If Death Benefit Option 2 has been elected, a partial
surrender would reduce the Accumulation Value, but would not
reduce the Specified Amount. The reduction in the
Accumulation Value reduces the amount of the Death Benefit
Proceeds.
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts, surrenders from each will be made
in proportion to the assets in each Sub-Account at the time
of the surrender, unless LLANY is instructed otherwise in
proper written form at the Administrative Office. LLANY may
at its discretion decline any request for a partial
surrender.
SURRENDER OF THE POLICY
You may surrender the Policy at any time. On surrender of
the Policy, LLANY will pay you or your assignee, the
Surrender Value next computed after receipt of the request
in proper written form at the Administrative Office. All
coverage under the Policy will automatically terminate if
the Owner makes a full surrender.
SURRENDER VALUE
The Surrender Value of a Policy is the amount the Owner can
receive in a lump sum by surrendering the Policy. The
Surrender Value is the Net Accumulation Value less the
Surrender Charge (SEE CHARGES AND FEES, Surrender Charge).
All or part of the Surrender Value may be applied to one or
more of the Settlement Options. Surrender Values are
illustrated in Appendix 1.
DEFERRAL OF PAYMENT AND TRANSFERS
Payment of loans or of the Surrender Value from any
Sub-Accounts will be made within 7 days. Payment or transfer
from the Fixed Account may be deferred up to six months at
LLANY's option. If LLANY exercises its right to defer any
payment from the Fixed Account, interest will accrue and be
paid as required by law from the date the recipient would
otherwise have been entitled to receive the payment.
ASSIGNMENT; CHANGE OF OWNERSHIP
While either Insured is living, you may assign your rights
in the Policy, including the right to change the beneficiary
designation. The assignment must be in proper written form,
signed by you and recorded at the Administrative Office. No
assignment will affect, or prejudice LLANY as to, any
payment made or action taken by LLANY before it was
recorded. LLANY is not responsible for any assignment not
submitted for recording, nor is LLANY responsible for the
sufficiency or validity of any assignment. Any assignment is
subject to any indebtedness owed to LLANY at the time the
assignment is recorded and any interest accrued on such
indebtedness after recordation of any assignment.
Once recorded, the assignment remains effective until
released by the assignee in proper written form. So long as
an effective assignment remains outstanding, you will not be
permitted to take any action with respect to the Policy
without the consent of the assignee in proper written form.
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So long as either Insured is living, you may name a new
Owner by recording a change in ownership in proper written
form at the Administrative Office. On recordation, the
change will be effective as of the date of execution of the
document of transfer or, if there is no such date, the date
of recordation. No such change of ownership will affect, or
prejudice LLANY as to, any payment made or action taken by
LLANY before it was recorded. LLANY may require that the
Policy be submitted to it for endorsement before making a
change.
LAPSE AND REINSTATEMENT
LAPSE OF A POLICY
If at any time the Net Accumulation Value is insufficient to
pay the Monthly Deduction, the Policy is subject to lapse
and automatic termination of all coverage under the Policy.
The Net Accumulation Value may be insufficient (1) because
it has been exhausted by earlier deductions, (2) due to poor
investment performance, (3) due to partial surrenders,
(4) due to indebtedness for Policy Loans, or (5) because of
some combination of the foregoing factors.
If LLANY has not received a Premium Payment or payment of
indebtedness on Policy Loans necessary so that the Net
Accumulation Value is sufficient to pay the Monthly
Deduction Amount on a Monthly Anniversary Day, LLANY will
send a written notice to the Owner and any assignee of
record. The notice will state the amount of the Premium
Payment or payment of indebtedness on Policy Loans necessary
such that the Net Accumulation Value is at least equal to
two times the Monthly Deduction Amount. If the minimum
required amount set forth in the notice is not paid to LLANY
on or before the day that is the later of (a) 31 days after
the date of mailing of the notice, and (b) 61 days after the
date of the Monthly Anniversary Day with respect to which
such notice was sent (together, the Grace Period), then the
policy shall terminate and all coverage under the policy
shall lapse without value. If the Second Death occurs during
the Grace Period, Death Benefit Proceeds will be paid, but
will be reduced, in addition to any other reductions, by any
unpaid Monthly Deductions. If the Second Death occurs after
the Policy has lapsed, no Death Benefit Proceeds will be
paid.
REINSTATEMENT OF A LAPSED POLICY
After the Policy has lapsed due to the failure to make a
necessary payment before the end of an applicable Grace
Period, it may be reinstated provided (a) it has not been
surrendered, (b) there is an application for reinstatement
in proper written form, (c) evidence of insurability of both
insureds is furnished to LLANY and it agrees to accept the
risk, (d) LLANY receives a payment sufficient to keep the
Policy in force for at least two months, and (e) any accrued
loan interest is paid. The effective date of the reinstated
Policy shall be the Monthly Anniversary Day after the date
on which LLANY approves the application for reinstatement.
Surrender Charges will be reinstated as of the Policy Year
in which the Policy lapsed.
If the Policy is reinstated, such reinstatement is effective
on the Monthly Anniversary Day following LLANY approval. The
Accumulation Value at reinstatement will be the Net Premium
Payment then made less all Monthly Deductions due.
If the Surrender Value is not sufficient to cover the full
Surrender Charge at the time of lapse, the remaining portion
of the Surrender Charge will also be reinstated at the time
of Policy reinstatement.
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COMMUNICATIONS WITH LLANY
PROPER WRITTEN FORM
When ever this Prospectus refers to a communication "in
proper written form," it means in writing, in form and
substance reasonably satisfactory to LLANY, received at the
Administrative Office.
OTHER POLICY PROVISIONS
ISSUANCE
A Policy may only be issued upon receipt of satisfactory
evidence of insurability, and generally only when both
Insureds are at least Age 18 but are less than Age 85.
DATE OF COVERAGE
The date of coverage will be the Date of Issue, provided
both Insureds are alive and prior to any change in the
health and insurability of the Insureds as represented in
the application.
RIGHT TO EXCHANGE THE POLICY
The Owner may exchange the policy for separate single life
policies on each of the Insureds under any of the following
circumstances; 1) a change in the Internal Revenue Code
(IRC) that would result in a less favorable tax treatment of
the Insurance provided under the policy, 2) the Insureds are
legally divorced while the policy is inforce, or 3) the
Insureds' business is legally dissolved while the policy is
inforce.
Such a policy split is subject to all of the following
conditions; 1) both insureds are alive and the policy is
inforce at the time of the change in circumstances noted
above, 2) evidence of insurability satisfactory to Lincoln
Life is furnished, unless a) the exchange is applied for
within twelve months of the enactment of the change in the
IRC, or b) the exchange is applied for within 24 months of
the date of legal divorce with the split to become effective
after twenty-four months following the date of legal
divorce, 3) the amount of insurance of each new policy is
not larger than one half of the Amount of Insurance then in
force under the policy, 4) the premium for each new policy
is determined according to Lincoln Life's rates then in
effect for that policy based on each Insured's then attained
age and sex, and 5) any other requirements as determined by
Lincoln Life are met.
The new policies will not take effect until the date all
such requirements are met. There will be no surrender charge
under the existing policy when it is split into two new
policies. However, the two new policies will incur new
premium loads, surrender and other charges from the
effective date.
MATURITY OF THE POLICY
If either Insured is still living on the Monthly Anniversary
following the younger Insured's 100th birth date, at that
point the Policy will terminate and the Owner will receive
the Surrender Value.
INCONTESTABILITY
LLANY will not contest payment of the Death Benefit Proceeds
based on the initial Specified Amount after the Policy has
been in force for two years from the Date of Issue so long
as both Insureds were alive during those two years. For any
increase in Specified Amount requiring evidence of
insurability, LLANY will not contest payment of
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the Death Benefit Proceeds based on such an increase after
it has been in force for two years from its effective date
so long as both Insureds were alive during those two years.
MISSTATEMENT OF AGE OR GENDER
If the Age or gender of either of the Insureds has been
misstated, the affected benefits will be adjusted. The
amount of the Death Benefit Proceeds will be 1. multiplied
by 2. and then the result added to 3. where:
1. is the Net Amount at Risk at the time of the Second
Death;
2. is the ratio of the monthly Cost of Insurance applied
in the Policy month of death to the monthly Cost of
Insurance that should have been applied at the true
Age and gender in the Policy month of death; and
3. is the Accumulation Value at the time of the Second
Death.
SUICIDE
If the Second Death is by suicide, while sane or insane,
within two years from the Date of Issue, LLANY will upon the
Second Death pay no more than the sum of the premiums paid,
less any indebtedness and the amount of any partial
surrenders. If the Second Death is by suicide, while sane or
insane, within two years from the date an application is
accepted for an increase in the Specified Amount, LLANY will
upon the Second Death pay no more than a refund of the
monthly charges for the cost of such additional benefit.
RIDERS
Riders may be offered and we may charge for them.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends
are payable. These Policies do not share in the profits or
surplus earnings of LLANY.
TAX ISSUES
INTRODUCTION. The Federal income tax treatment of the policy
is complex and sometimes uncertain. The Federal income tax
rules may vary with your particular circumstances. This
discussion does not include all the Federal income tax
rules that may affect you and your policy, and is not
intended as tax advice. This discussion also does not
address other Federal tax consequences, or state or local
tax consequences, associated with the policy. As a result,
you should always consult a tax adviser about the
application of tax rules to your individual situation.
TAXATION OF LIFE INSURANCE CONTRACTS IN GENERAL
TAX STATUS OF THE POLICY. Section 7702 of the Code
establishes a statutory definition of life insurance for
Federal tax purposes. We believe that the policy will meet
the statutory definition of life insurance, which places
limitations on the amount of premium payments that may be
made and the contract values that can accumulate relative to
the death benefit. As a result, the death benefit payable
under the policy will generally be excludable from the
beneficiary's gross income, and interest and other income
credited under the policy will not be taxable unless certain
withdrawals are made (or are deemed to be made) from the
policy prior to the insured's death, as discussed below.
This tax treatment will only apply, however, if (1) the
investments of the Separate Account are "adequately
diversified" in accordance with Treasury Department
regulations, and (2) we, rather than the you, are considered
the owner of the assets of the Separate Account for Federal
income tax purposes.
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INVESTMENTS IN THE SEPARATE ACCOUNT MUST BE DIVERSIFIED. For
a policy to be treated as a life insurance contract for
Federal income tax purposes, the investments of the Separate
Account must be "adequately diversified." IRS regulations
define standards for determining whether the investments of
the Separate Account are adequately diversified. If the
Separate Account fails to comply with these diversification
standards, you could be required to pay tax currently on the
excess of the contract value over the contract premium
payments. Although we do not control the investments of the
subaccounts, we expect that the subaccounts will comply with
the IRS regulations so that the Separate Account will be
considered "adequately diversified."
RESTRICTION ON INVESTMENT OPTIONS. Federal income tax law
limits your right to choose particular investments for the
policy. Because the IRS has not issued guidance specifying
those limits, the limits are uncertain and your right to
allocate contract values among the subaccounts may exceed
those limits. If so, you would be treated as the owner of
the assets of the Separate Account and thus subject to
current taxation on the income and gains from those assets.
We do not know what limits may be set by the IRS in any
guidance that it may issue and whether any such limits will
apply to existing policies. We reserve the right to modify
the policy without your consent to try to prevent the tax
law from considering you as the owner of the assets of the
Separate Account.
NO GUARANTEES REGARDING TAX TREATMENT. We make no guarantee
regarding the tax treatment of any policy or of any
transaction involving a policy. However, the remainder of
this discussion assumes that your policy will be treated as
a life insurance contract for Federal income tax purposes
and that the tax law will not impose tax on any increase in
your contract value until there is a distribution from your
policy.
TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS. In
general, the amount of the death benefit payable from a
policy because of the death of the insured is excludable
from gross income. Certain transfers of the policy for
valuable consideration, however, may result in a portion of
the death benefit being taxable.
If the death benefit is not received in a lump sum and is,
instead, applied under one of the settlement options,
payments generally will be prorated between amounts
attributable to the death benefit which will be excludable
from the beneficiary's income and amounts attributable to
interest (accruing after the insured's death) which will be
includible in the beneficiary's income.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing
provisions of the Code, except as described below, any
increase in your contract value is generally not taxable to
you unless amounts are received (or are deemed to be
received) from the policy prior to the insured's death. If
there is a total withdrawal from the policy, the surrender
value will be includible in the your income to the extent
the amount received exceeds the "investment in the
contract." (If there is any debt at the time of a total
withdrawal, such debt will be treated as an amount received
by the owner.) The "investment in the contract" generally is
the aggregate amount of premium payments and other
consideration paid for the policy, less the aggregate amount
received under the policy previously to the extent such
amounts received were excludable from gross income. Whether
partial withdrawals (or other amounts deemed to be
distributed) from the policy constitute income to you
depends, in part, upon whether the policy is considered a
"modified endowment contract" (a "MEC") for Federal income
tax purposes.
POLICIES WHICH ARE MECS
CHARACTERIZATION OF A POLICY AS A MEC. A policy will be
classified as a MEC if premiums are paid more rapidly than
allowed by a "7-pay test" under the tax law or if the policy
is received in exchange for another policy that is a MEC. In
addition, even if the policy initially is not a MEC, it may
in certain circumstances become a MEC. These
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circumstances would include a later increase in benefits,
any other material change of the policy (within the meaning
of the tax law), and a withdrawal or reduction in the death
benefit during the first seven contract years.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES
UNDER MECS. If the policy is a MEC, withdrawals from the
policy will be treated first as withdrawals of income and
then as a recovery of premium payments. Thus, withdrawals
will be includible in income to the extent the contract
value exceeds the investment in the policy. The Code treats
any amount received as a loan under a policy, and any
assignment or pledge (or agreement to assign or pledge) any
portion of your contract value, as a withdrawal of such
amount or portion. Your investment in the policy is
increased by the amount includible in income with respect to
such assignment, pledge, or loan.
PENALTY TAXES PAYABLE ON WITHDRAWALS. A 10% penalty tax may
be imposed on any withdrawal (or any deemed distribution)
from your MEC which you must include in your gross income.
The 10% penalty tax does not apply if one of several
exceptions exists. These exceptions include withdrawals or
surrenders that: you receive on or after you reach age
59 1/2, you receive because you became disabled (as defined
in the tax law), or you receive as a series of substantially
equal periodic payments for your life (or life expectancy).
SPECIAL RULES IF YOU OWN MORE THAN ONE MEC. In certain
circumstances, you must combine some or all of the life
insurance contracts which are MECs that you own in order to
determine the amount of withdrawal (including a deemed
withdrawal) that you must include in income. For example, if
you purchase two or more MECs from the same life insurance
company (or its affiliates) during any calendar year, the
Code treats all such policies as one contract. Treating two
or more policies as one contract could affect the amount of
a withdrawal (or a deemed withdrawal) that you must include
in income and the amount that might be subject to the 10%
penalty tax described above.
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS. If the policy is not a MEC,
the amount of any withdrawal from the policy will generally
be treated first as a non-taxable recovery of premium
payments and then as income from the policy. Thus, a
withdrawal from a policy that is not a MEC will not be
includible in income except to the extent it exceeds the
investment in the policy immediately before the withdrawal.
CERTAIN DISTRIBUTIONS REQUIRED BY THE TAX LAW IN THE FIRST
15 POLICY YEARS. Section 7702 places limitations on the
amount of premium payments that may be made and the contract
values that can accumulate relative to the death benefit.
Where cash distributions are required under Section 7702 in
connection with a reduction in benefits during the first 15
years after the policy is issued (or if withdrawals are made
in anticipation of a reduction in benefits, within the
meaning of the tax law, during this period), some or all of
such amounts may be includible in income. A reduction in
benefits may occur when the face amount is decreased,
withdrawals are made, and in certain other instances.
TAX TREATMENT OF LOANS. If your policy is not a MEC, a loan
you receive under the policy is generally treated as your
indebtedness. As a result, no part of any loan under such a
policy constitutes income to you so long as the policy
remains in force. Nevertheless, in those situations where
the interest rate credited to the loan account equals the
interest rate charged to you for the loan, it is possible
that some or all of the loan proceeds may be includible in
your income. If a policy lapses (or if all contract value is
withdrawn) when a loan is outstanding, the amount of the
loan outstanding will be treated as withdrawal proceeds for
purposes of determining whether any amounts are includible
in the your income.
35
<PAGE>
LAST SURVIVOR CONTRACT
Although we believe that the policy, when issued as a last
survivor contract, complies with Section 7702 of the Code,
the manner in which Section 7702 should be applied to last
survivor contracts is not directly addressed by Section
7702. In the absence of final regulations or other guidance
issued under Section 7702 regarding this form of contract,
there is necessarily some uncertainty whether a last
survivor contract will meet the Section 7702 definition of a
life insurance contract. As a result, we may need to return
a portion of your premium (with earnings) and impose higher
cost of insurance charges in the future.
Due to the coverage of more than one insured under the
policy, there are special considerations in applying the
7-pay test. For example, a reduction in the death benefit at
any time, such as may occur upon a partial surrender, may
cause the policy to be a MEC. Also and more generally, the
manner of applying the 7-pay test is somewhat uncertain in
the case of policies covering more than one insured.
OTHER CONSIDERATIONS
INSURED LIVES PAST AGE 100. If the insured survives beyond
the end of the mortality table used to measure charges under
the policy, which ends at age 100, we believe the policy
will continue to qualify as life insurance for Federal tax
purposes. However, there is some uncertainty regarding this
treatment, and it is possible that you would be viewed as
constructively receiving the cash value in the year the
insured attains age 100.
COMPLIANCE WITH THE TAX LAW. We believe that the maximum
amount of premium payments we have determined for the
policies will comply with the Federal tax definition of life
insurance. We will monitor the amount of premium payments,
and, if the premium payments during a contract year exceed
those permitted by the tax law, we will refund the excess
premiums within 60 days of the end of the policy year and
will pay interest and other earnings (which will be
includible in income subject to tax) as required by law on
the amount refunded. We also reserve the right to increase
the death benefit (which may result in larger charges under
a policy) or to take any other action deemed necessary to
maintain compliance of the policy with the Federal tax
definition of life insurance.
DISALLOWANCE OF INTEREST DEDUCTIONS. If an entity (such as a
corporation or a trust, not an individual) purchases a
policy or is the beneficiary of a policy issued after June
8, 1997, a portion of the interest on indebtedness unrelated
to the policy may not be deductible by the entity. However,
this rule does not apply to a policy owned by an entity
engaged in a trade or business which covers the life of an
individual who is a 20-percent owner of the entity, or an
officer, director, or employee of the trade or business, at
the time first covered by the policy. This rule also does
not apply to a policy owned by an entity engaged in a trade
or business which covers the joint lives of the 20% owner of
the entity and the owner's spouse at the time first covered
by the policy.
FEDERAL INCOME TAX WITHHOLDING. We will withhold and remit
to the IRS a part of the taxable portion of each
distribution made under a policy unless you notify us in
writing at or before the time of the distribution that tax
is not to be withheld. Regardless of whether you request
that no taxes be withheld or whether the Company withholds a
sufficient amount of taxes, you will be responsible for the
payment of any taxes and early distribution penalties that
may be due on the amounts received. You may also be required
to pay penalties under the estimated tax rules, if your
withholding and estimated tax payments are insufficient to
satisfy your total tax liability.
36
<PAGE>
CHANGES IN THE POLICY OR CHANGES IN THE LAW. Changing the
owner, exchanging the contract, and other changes under the
policy may have tax consequences (in addition to those
discussed herein) depending on the circumstances of such
change. The above discussion is based on the Code, IRS
regulations, and interpretations existing on the date of
this Prospectus. However, Congress, the IRS, and the courts
may modify these authorities, sometimes retroactively.
TAX STATUS OF LLANY
Under existing Federal income tax laws, LLANY does not pay
tax on investment income and realized capital gains of the
Separate Account. LLANY does not expect that it will incur
any Federal income tax liability on the income and gains
earned by the Separate Account. We, therefore, do not impose
a charge for Federal income taxes. If Federal income tax law
changes and we must pay tax on some or all of the income and
gains earned by the Separate Account, we may impose a charge
against the Separate Account to pay the taxes.
FAIR VALUE OF THE POLICY
It is sometimes necessary for tax and other reasons to
determine the "fair value" of the Policy. The fair value of
the Policy is measured differently for different purposes.
It is not necessarily the same as the Accumulation Value or
the Net Accumulation Value, although the amount of the Net
Accumulation Value will typically be important in valuing
the Policy for this purpose. For some but not all purposes,
the fair value of the Policy may be the Surrender Value of
the Policy. The fair value of the Policy may be impacted by
developments other than the performance of the underlying
investments. For example, without regard to any other
factor, it increases as the Insureds grow older. Moreover,
on the death of the first of the Insureds to die, it tends
to increase significantly. The Owner should consult with his
or her advisors for guidance as to the appropriate
methodology for determining the fair value of the Policy for
a particular purpose.
DIRECTORS AND OFFICERS OF LLANY
The following persons are Directors and Officers of LLANY.
Except as indicated below, the address of each is 120
Madison Street, Suite 1700, Syracuse, New York 13202 and
each has been employed by LLANY or its affiliates for more
than five years.
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
-------------------------------- ------------------------------------------
<S> <C>
ROLAND C. BAKER President and Director [1/95-present],
DIRECTOR First Penn- Pacific Life Insurance Co.
1801 S. Meyers Rd. Formerly: Chairman and CEO [7/88-1/95],
Oakbrook Terrace, IL 60181 Baker, Rakish, Shipley & Politzer, Inc.
J. PATRICK BARRETT Chairman and Chief Executive Officer,
DIRECTOR CARPAT Investments [9/87-present];
One Telergy Parkway President, Chief Operating Officer and
East Syracuse, NY 13057 Director, Telergy, Inc. [4/98-present];
Chief Executive Officer and Director,
Syracuse Executive Air Service, Inc.
[3/89-present]; Director, Bennington Iron
Works, Inc. [6/89-present]; Director,
Coyne Industrial Enterprises Corp.
[1998-present].
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
-------------------------------- ------------------------------------------
<S> <C>
DAVID N. BECKER Vice President and Chief Actuarial
SECOND VICE PRESIDENT AND Officer, The Lincoln National Life
APPOINTED ACTUARY Insurance Co.
1300 South Clinton St.
Fort Wayne, IN 46802
THOMAS D. BELL, JR. President and Chief Executive Officer
DIRECTOR Young & Rubicam [1/00-present]. Formerly:
285 Madison Avenue President and Chief Executive Officer
New York, NY 10017 [4/95-9/98], Burson- Marstellar; Vice
Chairman [4/94-5/95], Gulfstream Aerospace
Corp.
JON A. BOSCIA President, Chief Executive Officer and
DIRECTOR Director, Lincoln National Corp.
Centre Square, West Tower [1/98-present]. Formerly: President and
Suite 3900 Chief Executive Officer [10/96-1/98],
Philadelphia, PA 19102 President and Chief Operating Officer
[5/94-10/96] The Lincoln National Life
Insurance Co.
JOANNE B. COLLINS President, Treasurer and Director, Lincoln
PRESIDENT, TREASURER AND Life & Annuity Company of New York
DIRECTOR [8/99-present]; Second Vice President
Lincoln National Corporation
[4/96-present]. Formerly: Second Vice
President [9/84-3/96] Lincoln National
Corporation-Reinsurance.
JOHN H. GOTTA Director, Second Vice President and
DIRECTOR, SECOND VICE PRESIDENT Assistant Secretary [12/99-present],
AND ASSISTANT SECRETARY Lincoln Life & Annuity Company of New
350 Church Street York; Chief Executive Officer of Life
Hartford, CT 06103 Insurance, Senior Vice President and
Assistant Secretary [12/99-present] The
Lincoln National Life Insurance Company.
Formerly: Senior Vice President and
Assistant Secretary [4/98-12/99]; Senior
Vice President [2/98-4/98]; Vice President
and General Manager [1/98-2/98] The
Lincoln National Life Insurance Co; Senior
Vice President, Connecticut General Life
Insurance Company [3/96-12/97]; Vice
President, Connecticut (Massachusetts
Mutual) Mutual Life Insurance Company
[8/94-3/96].
BARBARA S. KOWALCZYK Senior Vice President, Corporation
DIRECTOR Planning [5/94-present] Lincoln National
Centre Square West Tower Corporation.
1500 Market Street Suite 3900
Philadelphia, PA 19102
MARGUERITE L. LACHMAN Principal [11/99-present], Lend Lease Real
DIRECTOR Estate Investments. Formerly: Managing
437 Madison Avenue, 18th Floor Director [4/87-11/99], Schroeder Real
New York, NY 10022 Estate Associates.
LOUIS G. MARCOCCIA Senior Vice President for Business,
DIRECTOR Finance and Administrative Services,
Syracuse University Syracuse University [1975-present].
Syracuse, NY 13244 Formerly: Auditor [1969-1975] Price
Waterhouse.
TROY D. PANNING Second Vice President and Chief Financial
SECOND VICE PRESIDENT AND Officer
CHIEF FINANCIAL OFFICER [11/96-present], Lincoln Life & Annuity
Company of New York. Formerly: Accountant
[9/90-11/96] Ernst & Young LLP
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
-------------------------------- ------------------------------------------
<S> <C>
JOHN M. PIETRUSKI Chairman of the Board, Texas Biotechnology
DIRECTOR Corp.
One Penn Plaza
Suite 3408
New York, NY 10119
LAWRENCE T. ROWLAND Chairman, Chief Executive Officer,
DIRECTOR President and Director [10/96-present]
1700 Magnavox Way Lincoln National Reassurance Co. Formerly:
One Reinsurance Place Senior Vice President [10/95-10/96]; Vice
Ft. Wayne, IN 46802 President [10/91-10/95] Lincoln National
Life Reinsurance Co.
RICHARD C. VAUGHAN Executive Vice President and Chief
DIRECTOR Financial Officer [1/95-present].
Centre Square West Tower Formerly: Senior Vice President and Chief
1500 Market Street Suite 3900 Financial Officer [6/92-1/95] Lincoln
Philadelphia, PA 19102 National Corp.
</TABLE>
DISTRIBUTION OF POLICIES
LLANY intends to offer the Policy in New York. Lincoln
Financial Advisors Corporation ("LFA"), an affiliate of
LLANY and the principal underwriter for the Policies, is
registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 as a broker-dealer and
is a member of the National Association of Securities
Dealers ("NASD"). The principal business address of LFA is
350 Church Street, Hartford, CT 06103.
The Policy will be sold by individuals, who in addition to
being appointed as life insurance agents for LLANY, are also
registered representatives of LFA or other broker-dealers.
These representatives ordinarily receive commission and
service fees up to 98% of the first year premium, plus up to
10% of all other premiums paid. In lieu of premium-based
commission, LLANY may pay equivalent amounts based on
Accumulation Value. The selling office receives additional
compensation on the first year premium and all additional
premiums. In some situations, the selling office may elect
to share its commission with the registered representative.
Selling representatives are also eligible for bonuses and
non-cash compensation if certain production levels are
reached. All compensation is paid from LLANY's resources,
which include sales charges made under this Policy.
CHANGES OF INVESTMENT POLICY
LLANY may materially change the investment policy of the
Separate Account. LLANY must inform the Owners and obtain
all necessary regulatory approvals. Any change must be
submitted to the various state insurance departments which
shall disapprove it if deemed detrimental to the interests
of the Owners or if it renders LLANY's operations hazardous
to the public. If an Owner objects, the Policy may be
converted to a substantially comparable fixed benefit life
insurance policy offered by LLANY on the life of the
Insureds. The Owner has the later of 60 days from the date
of the investment policy change or 60 days from being
informed of such change to make this conversion. LLANY will
not require evidence of insurability for this conversion.
The new policy will not be affected by the investment
experience of any separate account. The new policy will be
for an amount of insurance not exceeding the Death Benefit
of the Policy converted on the date of such conversion.
39
<PAGE>
OTHER CONTRACTS ISSUED BY LLANY
LLANY from time to time offers other variable annuity
contracts and variable life insurance policies with benefits
which vary in accordance with the investment experience of a
separate account of LLANY.
STATE REGULATION
LLANY is subject to the laws of New York governing insurance
companies and to regulation by the New York Insurance
Department. An annual statement in a prescribed form is
filed with the New York Insurance Department each year
covering the operation of LLANY for the preceding year and
its financial condition as of the end of such year.
Regulation by the Insurance Department includes periodic
examination to determine LLANY's contract liabilities and
reserves so that the Insurance Department may certify the
items are correct. LLANY's books and accounts are subject to
review by the Insurance Department at all times and a full
examination of its operations is conducted periodically by
the New York Department of Insurance. Such regulation does
not, however, involve any supervision of management or
investment practices or policies.
A blanket bond with a per event limit of $25 million and an
annual policy aggregate limit of $50 million covers all of
the officers and employees of the Company.
REPORTS TO OWNERS
LLANY maintains Policy records and will mail to each Owner,
at the last known address of record, an annual statement
showing the amount of the current Death Benefit, the
Accumulation Value, and Surrender Value, premiums paid and
monthly charges deducted since the last report, the amounts
invested in each Sub-Account and any Loan Account Value.
Owners will also be sent annual reports containing financial
statements for the Separate Account and annual and
semi-annual reports of the Funds as required by the 1940
Act.
In addition, Owners will receive statements of significant
transactions, such as changes in Specified Amount, changes
in Death Benefit Option, transfers among Sub-Accounts,
Premium Payments, loans, loan repayments, reinstatement and
termination.
ADVERTISING
LLANY is also ranked and rated by independent financial
rating services, including Moody's, Standard & Poor's,
Duff & Phelps and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or
claims-paying ability of LLANY. The ratings are not intended
to reflect the investment experience or financial strength
of the Separate Account. LLANY may advertise these ratings
from time to time. In addition, LLANY may include in certain
advertisements, endorsements in the form of a list of
organizations, individuals or other parties which recommend
LLANY or the Policies. Furthermore, LLANY may occasionally
include in advertisements comparisons of currently taxable
and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles
and general economic conditions.
We are a member of the Insurance Marketplace Standards
Association ("IMSA") and may include the IMSA logo and
information about IMSA membership in our advertisements.
Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and services
for individually sold life insurance and annuities.
LEGAL PROCEEDINGS
At this time, LLANY is not involved in any material
litigation. From time to time, legal proceedings arise which
generally are routine and in the ordinary course of
business.
40
<PAGE>
EXPERTS
The financial statements of the Separate Account and the
statutory-basis financial statements of LLANY appearing in
this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in
their reports which appear elsewhere in this document and in
the Registration Statement. The financial statements audited
by Ernst & Young LLP have been included in this document in
reliance on their reports given on their authority as
experts in accounting and auditing.
Actuarial matters included in this prospectus have been
examined by Vaughn W. Robbins, FSA as stated in the Opinion
filed as an Exhibit to the Registration Statement.
Legal matters in connection with the Policies described
herein are being passed upon by Robert O. Sheppard, Esq., as
stated in the Opinion filed as an Exhibit to the
Registration Statement.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended, with respect to the Policies offered hereby. This
Prospectus does not contain all the information set forth in
the Registration Statement and amendments thereto and
exhibits filed as a part thereof, to all of which reference
is hereby made for further information concerning the
Separate Account, LLANY, and the Policies offered hereby.
Statements contained in this Prospectus as to the content of
Policies and other legal instruments are summaries. For a
complete statement of the terms thereof, reference is made
to such instruments as filed.
41
<PAGE>
APPENDIX 1
ILLUSTRATIONS OF ACCUMULATION VALUES, SURRENDER VALUES, AND
DEATH BENEFIT PROCEEDS
The illustrations in this Prospectus have been prepared to
help show how values under the Policies change with
investment performance. The illustrations illustrate how
Accumulation Values, Surrender Values and Death Benefit
Proceeds under a Policy would vary over time if the
hypothetical gross investment rates of return were a uniform
annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%,
6%, or 12% over a period of years, but fluctuates above or
below those averages for individual years, the Accumulation
Values, Surrender Values and Death Benefit Proceeds may be
different. The illustrations also assume there are no Policy
Loans or Partial Surrenders, no additional Premium Payments
are made other than shown, no Accumulation Values are
allocated to the Fixed Account, and there are no changes in
the Specified Amount or Death Benefit Option.
The amounts shown for the Accumulation Value, Surrender
Value and Death Benefit Proceeds as of each Policy
Anniversary reflect the fact that charges are made and
expenses applied which lower investment return on the assets
held in the Sub-Accounts. Daily charges are made against the
assets of the Sub-Accounts for assuming mortality and
expense risks. The current mortality and expense risk
charges are equivalent to an annual effective rate of 0.80%
of the daily net asset value of the Separate Account. The
mortality and expense risk charge is guaranteed never to
exceed an annual effective rate of 0.80% of the daily net
asset value of the Separate Account. In addition, the
amounts shown also reflect the deduction of Fund investment
advisory fees and other expenses which will vary depending
on which funding vehicle is chosen but which are assumed for
purposes of these illustrations to be equivalent to an
annual effective rate of 0.82% of the daily net asset value
of the Separate Account. This rate reflects an arithmetic
average of total Fund portfolio annual expenses for the year
ending December 31, 1999.
Considering charges for mortality and expense risks and the
assumed Fund expenses, gross annual rates of 0%, 6% and 12%
correspond to net investment experience at annual rates of
-1.61%, 4.30% and 10.20% on a current basis, -1.61%, 4.30%
and 10.20% on a guaranteed basis.
The illustrations also reflect the fact that LLANY makes
monthly charges for providing insurance protection. Current
values reflect current Cost of Insurance charges and
guaranteed values reflect the maximum Cost of Insurance
charges guaranteed in the Policy. The values shown are for
Policies which are issued as preferred and standard.
Policies issued on a substandard basis would result in lower
Accumulation Values and Death Benefit Proceeds than those
illustrated.
The illustrations also reflect the fact that LLANY deducts a
premium load of 8.0% from each Premium Payment.
The Surrender Values shown in the illustrations reflect the
fact that LLANY will deduct a Surrender Charge from the
Policy's Accumulation Value for any Policy surrendered in
full during the first fifteen Policy Years. Surrender
Charges reflect, in part, age and Specified Amount, and are
shown in the illustrations.
In addition, the illustrations reflect the fact that LLANY
deducts a monthly administrative charge at the beginning of
each Policy Month. The monthly administrative expense charge
is a flat charge per month for all years current values
reflect a current flat dollar monthly administrative expense
charge of $10.
Upon request, LLANY will furnish a comparable illustration
based on the proposed insureds' ages, gender classification,
smoking classification, risk classification and premium
payment requested.
42
<PAGE>
MALE AGE 55/FEMALE AGE 55 NONSMOKER
STANDARD -- $13,500 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- --------------------- ----------- --------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,175 1,000,000 1,000,000 1,000,000 10,433 11,115 11,797
2 29,059 1,000,000 1,000,000 1,000,000 20,588 22,598 24,692
3 44,687 1,000,000 1,000,000 1,000,000 30,392 34,388 38,716
4 61,096 1,000,000 1,000,000 1,000,000 39,820 46,466 53,956
5 78,326 1,000,000 1,000,000 1,000,000 48,845 58,813 70,507
6 96,417 1,000,000 1,000,000 1,000,000 57,432 71,402 88,467
7 115,413 1,000,000 1,000,000 1,000,000 65,536 84,193 107,935
8 135,359 1,000,000 1,000,000 1,000,000 73,094 97,128 129,011
9 156,302 1,000,000 1,000,000 1,000,000 80,022 110,128 151,784
10 178,292 1,000,000 1,000,000 1,000,000 86,222 123,097 176,352
11 201,381 1,000,000 1,000,000 1,000,000 93,259 137,655 204,603
12 225,625 1,000,000 1,000,000 1,000,000 99,339 152,056 235,090
13 251,082 1,000,000 1,000,000 1,000,000 104,356 166,197 268,005
14 277,811 1,000,000 1,000,000 1,000,000 108,205 179,978 303,587
15 305,876 1,000,000 1,000,000 1,000,000 110,746 193,264 342,097
20 468,710 1,000,000 1,000,000 1,000,000 95,784 245,373 592,952
25 676,532 0 1,000,000 1,056,354 0 224,995 1,006,051
30 941,771 0 0 1,783,597 0 0 1,698,663
<CAPTION>
END OF SURRENDER VALUE
POLICY ANNUAL INVESTMENT RETURN OF SURRENDER
YEAR GROSS 0% GROSS 6% GROSS 12% CHARGE
- --------------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C>
1 0 0 0 13,680
2 6,908 8,918 11,012 13,680
3 17,132 21,128 25,456 13,260
4 27,060 33,706 41,196 12,760
5 36,645 46,613 58,307 12,200
6 45,712 59,682 76,747 11,720
7 54,416 73,073 96,815 11,120
8 63,214 87,248 119,131 9,880
9 71,382 101,488 143,144 8,640
10 78,822 115,697 168,952 7,400
11 87,079 131,475 198,423 6,180
12 94,399 147,116 230,150 4,940
13 100,656 162,497 264,305 3,700
14 105,745 177,518 301,127 2,460
15 109,506 192,024 340,857 1,240
20 95,784 245,373 592,952 0
25 0 224,995 1,006,051 0
30 0 0 1,698,663 0
</TABLE>
All Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Guaranteed cost of insurance
rates assumed. Guaranteed mortality and
expense risk charges, administrative fees and
premium load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of guaranteed
mortality and expense risk charges and
(2) assumed Fund total expenses of 0.82% per
year. See "Fund Expenses" at page 6 of this
Prospectus.
43
<PAGE>
MALE AGE 55/FEMALE AGE 55 NONSMOKER
STANDARD -- $13,500 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS
ACCUMULATED SURRENDER VALUE
END OF AT DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE ANNUAL INVESTMENT
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6%
-- ------- --------- --------- --------- ------- ------- --------- ------- -------
1 14,175 1,000,000 1,000,000 1,000,000 10,433 11,115 11,797 0 0
2 29,059 1,000,000 1,000,000 1,000,000 20,693 22,707 24,803 7,013 9,027
3 44,687 1,000,000 1,000,000 1,000,000 30,782 34,795 39,141 17,522 21,535
4 61,096 1,000,000 1,000,000 1,000,000 40,700 47,402 54,946 27,940 34,642
5 78,326 1,000,000 1,000,000 1,000,000 50,451 60,547 72,375 38,251 48,347
6 96,417 1,000,000 1,000,000 1,000,000 60,036 74,254 91,586 48,316 62,534
7 115,413 1,000,000 1,000,000 1,000,000 69,455 88,546 112,764 58,335 77,426
8 135,359 1,000,000 1,000,000 1,000,000 78,710 103,445 136,110 68,830 93,565
9 156,302 1,000,000 1,000,000 1,000,000 87,799 118,976 161,846 79,159 110,336
10 178,292 1,000,000 1,000,000 1,000,000 96,723 135,163 190,215 89,323 127,763
11 201,381 1,000,000 1,000,000 1,000,000 107,134 153,740 223,249 100,954 147,560
12 225,625 1,000,000 1,000,000 1,000,000 117,339 173,087 259,652 112,399 168,147
13 251,082 1,000,000 1,000,000 1,000,000 127,333 193,233 299,769 123,633 189,533
14 277,811 1,000,000 1,000,000 1,000,000 137,111 214,204 343,981 134,651 211,744
15 305,876 1,000,000 1,000,000 1,000,000 146,665 236,029 392,707 145,425 234,789
20 468,710 1,000,000 1,000,000 1,000,000 190,819 359,617 723,928 190,819 359,617
25 676,532 1,000,000 1,000,000 1,328,511 220,286 504,116 1,265,249 220,286 504,116
30 941,771 1,000,000 1,000,000 2,252,080 213,377 666,407 2,144,839 213,377 666,407
<CAPTION>
<S> <C> <C>
END OF
POLICY SURRENDER
YEAR GROSS 12% CHARGE
-- --------- ------
1 0 13,680
2 11,123 13,680
3 25,881 13,260
4 42,188 12,760
5 60,175 12,200
6 79,866 11,720
7 101,644 11,120
8 126,230 9,880
9 153,206 8,640
10 182,815 7,400
11 217,069 6,180
12 254,712 4,940
13 296,069 3,700
14 341,521 2,460
15 391,467 1,240
20 723,928 0
25 1,265,249 0
30 2,144,839 0
</TABLE>
All Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of current mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.82% per year. See "Fund
Expenses" at page 6 of this Prospectus.
44
<PAGE>
MALE AGE 65/FEMALE AGE 65 NONSMOKER
STANDARD -- $21,500 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS
ACCUMULATED SURRENDER VALUE
AT DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE ANNUAL INVESTMENT
END OF 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF RETURN OF
POLICY YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6%
-- ---------- ---------- ---------- ---------- ------- -------- ---------- ------- --------
1 22,575 1,000,000 1,000,000 1,000,000 17,508 18,622 19,737 0 0
2 46,279 1,000,000 1,000,000 1,000,000 34,005 37,302 40,734 8,905 12,202
3 71,168 1,000,000 1,000,000 1,000,000 49,292 55,825 62,904 25,232 31,765
4 97,301 1,000,000 1,000,000 1,000,000 63,250 74,053 86,243 40,250 51,053
5 124,741 1,000,000 1,000,000 1,000,000 75,745 91,828 110,744 53,785 69,868
6 153,553 1,000,000 1,000,000 1,000,000 86,603 108,953 136,376 65,723 88,073
7 183,806 1,000,000 1,000,000 1,000,000 95,591 125,165 163,068 75,751 105,325
8 215,571 1,000,000 1,000,000 1,000,000 102,382 140,108 190,684 84,742 122,468
9 248,925 1,000,000 1,000,000 1,000,000 106,548 153,323 219,025 91,108 137,883
10 283,946 1,000,000 1,000,000 1,000,000 107,586 164,270 247,863 94,346 151,030
11 320,718 1,000,000 1,000,000 1,000,000 106,681 174,148 278,837 95,661 163,128
12 359,329 1,000,000 1,000,000 1,000,000 101,494 180,626 310,157 92,674 171,806
13 399,871 1,000,000 1,000,000 1,000,000 91,379 183,010 341,752 84,759 176,390
14 442,439 1,000,000 1,000,000 1,000,000 75,600 180,509 373,621 71,180 176,089
15 487,136 1,000,000 1,000,000 1,000,000 53,199 172,098 405,773 50,999 169,898
20 746,464 0 0 1,000,000 0 0 575,481 0 0
25 1,077,439 0 0 1,000,000 0 0 800,133 0 0
30 1,499,857 0 0 1,373,234 0 0 1,359,638 0 0
<CAPTION>
<S> <C> <C>
END OF SURRENDER
POLICY YEAR GROSS 12% CHARGE
-- ---------- ------
1 0 25,100
2 15,634 25,100
3 38,844 24,060
4 63,243 23,000
5 88,784 21,960
6 115,496 20,880
7 143,228 19,840
8 173,044 17,640
9 203,585 15,440
10 234,623 13,240
11 267,817 11,020
12 301,337 8,820
13 335,132 6,620
14 369,201 4,420
15 403,573 2,200
20 575,481 0
25 800,133 0
30 1,359,638 0
</TABLE>
All Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Guaranteed cost of insurance
rates assumed. Guaranteed mortality and
expense risk charges, administrative fees and
premium load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of guaranteed
mortality and expense risk charges and
(2) assumed Fund total expenses of 0.82% per
year. See "Fund Expenses" at page 6 of this
Prospectus.
45
<PAGE>
MALE AGE 65/FEMALE AGE 65 NONSMOKER
STANDARD -- $21,713 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS
ACCUMULATED SURRENDER VALUE
AT DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE ANNUAL INVESTMENT
END OF 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF RETURN OF
POLICY YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6%
-- ---------- ---------- ---------- ---------- ------- -------- ---------- ------- --------
1 22,575 1,000,000 1,000,000 1,000,000 17,508 18,622 19,737 0 0
2 46,279 1,000,000 1,000,000 1,000,000 34,515 37,827 41,275 9,415 12,727
3 71,168 1,000,000 1,000,000 1,000,000 51,028 57,641 64,800 26,968 33,581
4 97,301 1,000,000 1,000,000 1,000,000 67,055 78,094 90,524 44,055 55,094
5 124,741 1,000,000 1,000,000 1,000,000 82,606 99,217 118,681 60,646 77,257
6 153,553 1,000,000 1,000,000 1,000,000 97,689 121,044 149,533 76,809 100,164
7 183,806 1,000,000 1,000,000 1,000,000 112,312 143,614 183,374 92,472 123,774
8 215,571 1,000,000 1,000,000 1,000,000 126,486 166,967 220,531 108,846 149,327
9 248,925 1,000,000 1,000,000 1,000,000 140,217 191,145 261,368 124,777 175,705
10 283,946 1,000,000 1,000,000 1,000,000 153,515 216,197 306,293 140,275 202,957
11 320,718 1,000,000 1,000,000 1,000,000 168,117 243,956 357,600 157,097 232,936
12 359,329 1,000,000 1,000,000 1,000,000 182,222 272,721 414,109 173,402 263,901
13 399,871 1,000,000 1,000,000 1,000,000 195,728 302,454 476,333 189,108 295,834
14 442,439 1,000,000 1,000,000 1,000,000 208,459 333,059 544,822 204,039 328,639
15 487,136 1,000,000 1,000,000 1,000,000 220,285 364,489 620,277 218,085 362,289
20 746,464 1,000,000 1,000,000 1,196,731 259,407 533,557 1,139,744 259,407 533,557
25 1,077,439 1,000,000 1,000,000 2,081,538 211,881 708,558 1,982,417 211,881 708,558
30 1,499,857 0 1,000,000 3,378,845 0 925,140 3,345,391 0 925,140
<CAPTION>
<S> <C> <C>
END OF SURRENDER
POLICY YEAR GROSS 12% CHARGE
-- ---------- ------
1 0 25,100
2 16,175 25,100
3 40,740 24,060
4 67,524 23,000
5 96,721 21,960
6 128,653 20,880
7 163,534 19,840
8 202,891 17,640
9 245,928 15,440
10 293,053 13,240
11 346,580 11,020
12 405,289 8,820
13 469,713 6,620
14 540,402 4,420
15 618,077 2,200
20 1,139,744 0
25 1,982,417 0
30 3,345,391 0
</TABLE>
All Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of current mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.82% per year. See "Fund
Expenses" at page 6 of this Prospectus.
46
<PAGE>
APPENDIX 2
CORRIDOR PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED AGE OF THE YOUNGER
INSURED (NEAREST BIRTHDAY) CORRIDOR PERCENTAGE
- --------------------------- -------------------
<S> <C>
0-40 250%
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
62 126
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75-90 105
91 104
92 103
93 102
94 101
95-99 100
</TABLE>
47
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
R-1
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1999
<TABLE>
<CAPTION>
AIM BT
AIM V.I. AIM BARON EAFE BT
V.I. INTERNATIONAL V.I. CAPITAL EQUITY EQUITY
GROWTH EQUITY VALUE ASSET INDEX 500 INDEX
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments at Market--Affiliated
(Cost $270,579) $271,753 $ -- $ -- $ -- $ -- $ -- $ --
Investments at
Market--Unaffiliated (Cost
$25,282) 29,379 2,849 1,053 2,803 947 884 2,185
----------------------------------- -------- --------- ----------- --------- --------- --------- ---------
Total Investments 301,132 2,849 1,053 2,803 947 884 2,185
Dividends Receivable 2 -- -- -- -- -- --
----------------------------------- -------- --------- ----------- --------- --------- --------- ---------
TOTAL ASSETS 301,134 2,849 1,053 2,803 947 884 2,185
LIABILITY--Payable to Lincoln
Life & Annuity Company of New
York 6 -- -- -- -- -- --
----------------------------------- -------- --------- ----------- --------- --------- --------- ---------
NET ASSETS $301,128 $ 2,849 $ 1,053 $ 2,803 $ 947 $ 884 $ 2,185
----------------------------------- ======== ========= =========== ========= ========= ========= =========
Percent of net assets 100.00% 0.95% 0.35% 0.93% 0.31% 0.29% 0.73%
----------------------------------- ======== ========= =========== ========= ========= ========= =========
NET ASSETS ARE REPRESENTED BY:
Units in accumulation period 225 75 232 75 75 187
Unit value $ 12.646 $ 13.998 $ 12.094 $ 12.592 $ 11.751 $ 11.653
----------------------------------- --------- ----------- --------- --------- --------- ---------
NET ASSETS $ 2,849 $ 1,053 $ 2,803 $ 947 $ 884 $ 2,185
----------------------------------- ========= =========== ========= ========= ========= =========
<CAPTION>
BT
SMALL
CAP INDEX
SUBACCOUNT
<S> <C>
--------------------------------
ASSETS
Investments at Market--Affilia
(Cost $270,579) $ --
Investments at
Market--Unaffiliated (Cost
$25,282) 924
-------------------------------- ---------
Total Investments 924
Dividends Receivable --
-------------------------------- ---------
TOTAL ASSETS 924
LIABILITY--Payable to Lincoln
Life & Annuity Company of New
York --
-------------------------------- ---------
NET ASSETS $ 924
-------------------------------- =========
Percent of net assets 0.31%
-------------------------------- =========
NET ASSETS ARE REPRESENTED BY:
Units in accumulation period 75
Unit value $ 12.278
-------------------------------- ---------
NET ASSETS $ 924
-------------------------------- =========
</TABLE>
See accompanying notes.
R-2
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITY (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
DELAWARE DELAWARE
DELAWARE DELAWARE PREMIUM PREMIUM DELAWARE DELAWARE
PREMIUM PREMIUM EMERGING SMALL PREMIUM PREMIUM
DELCHESTER DEVON MARKETS CAP VALUE REIT TREND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
ASSETS
Investments at Market--Affiliated
(Cost $270,579) $ 764 $ 798 $ 932 $ 797 $ 783 $ 1,037
Investments at
Market--Unaffiliated (Cost
$25,282) -- -- -- -- -- --
----------------------------------- --------- --------- --------- --------- --------- ---------
Total Investments 764 798 932 797 783 1,037
Dividends Receivable 2 -- -- -- -- --
----------------------------------- --------- --------- --------- --------- --------- ---------
TOTAL ASSETS 766 798 932 797 783 1,037
LIABILITY--Payable to Lincoln
Life & Annuity Company of New
York -- -- -- -- -- --
----------------------------------- --------- --------- --------- --------- --------- ---------
NET ASSETS $ 766 $ 798 $ 932 $ 797 $ 783 $ 1,037
----------------------------------- ========= ========= ========= ========= ========= =========
Percent of net assets 0.25% 0.27% 0.31% 0.26% 0.26% 0.34%
----------------------------------- ========= ========= ========= ========= ========= =========
NET ASSETS ARE REPRESENTED BY:
Units in accumulation period 75 75 75 75 75 75
Unit value $ 10.188 $ 10.606 $ 12.389 $ 10.597 $ 10.402 $ 13.792
----------------------------------- --------- --------- --------- --------- --------- ---------
NET ASSETS $ 766 $ 798 $ 932 $ 797 $ 783 $ 1,037
----------------------------------- ========= ========= ========= ========= ========= =========
<CAPTION>
FIDELITY
FIDELITY VIP III
VIP II GROWTH
CONTRAFUND OPPORTUNITIES
SERVICE CLASS SERVICE CLASS
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
--------------------------------
ASSETS
Investments at Market--Affilia
(Cost $270,579) $ -- $ --
Investments at
Market--Unaffiliated (Cost
$25,282) 907 819
-------------------------------- ---------- -----------
Total Investments 907 819
Dividends Receivable -- --
-------------------------------- ---------- -----------
TOTAL ASSETS 907 819
LIABILITY--Payable to Lincoln
Life & Annuity Company of New
York -- --
-------------------------------- ---------- -----------
NET ASSETS $ 907 $ 819
-------------------------------- ========== ===========
Percent of net assets 0.30% 0.27%
-------------------------------- ========== ===========
NET ASSETS ARE REPRESENTED BY:
Units in accumulation period 75 75
Unit value $ 12.055 $ 10.882
-------------------------------- ---------- -----------
NET ASSETS $ 907 $ 819
-------------------------------- ========== ===========
</TABLE>
See accompanying notes.
R-3
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITY (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
JANUS
JANUS ASPEN LN
ASPEN SERIES LN LN GLOBAL LN
SERIES WORLDWIDE LN CAPITAL EQUITY- ASSET MONEY
BALANCED GROWTH BOND APPRECIATION INCOME ALLOCATION MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments at Market--Affiliated
(Cost $270,579) $ -- $ -- $ 4,356 $ 2,847 $ 2,720 $ 838 $ 254,994
Investments at
Market--Unaffiliated (Cost
$25,282) 883 2,430 -- -- -- -- --
----------------------------------- --------- --------- --------- ---------- --------- --------- ---------
Total Investments 883 2,430 4,356 2,847 2,720 838 254,994
Dividends Receivable -- -- -- -- -- -- --
----------------------------------- --------- --------- --------- ---------- --------- --------- ---------
TOTAL ASSETS 883 2,430 4,356 2,847 2,720 838 254,994
LIABILITY--Payable to Lincoln
Life & Annuity Company of New
York -- -- -- -- -- -- 6
----------------------------------- --------- --------- --------- ---------- --------- --------- ---------
NET ASSETS $ 883 $ 2,430 $ 4,356 $ 2,847 $ 2,720 $ 838 $ 254,988
----------------------------------- ========= ========= ========= ========== ========= ========= =========
Percent of net assets 0.29% 0.81% 1.45% 0.95% 0.90% 0.28% 84.68%
----------------------------------- ========= ========= ========= ========== ========= ========= =========
NET ASSETS ARE REPRESENTED BY:
Units in accumulation period 75 169 434 223 242 75 25,282
Unit value $ 11.734 $ 14.344 $ 10.025 $ 12.762 $ 11.253 $ 11.139 $ 10.086
----------------------------------- --------- --------- --------- ---------- --------- --------- ---------
NET ASSETS $ 883 $ 2,430 $ 4,356 $ 2,847 $ 2,720 $ 838 $ 254,988
----------------------------------- ========= ========= ========= ========== ========= ========= =========
<CAPTION>
LN
SOCIAL
AWARENESS
SUBACCOUNT
<S> <C>
--------------------------------
ASSETS
Investments at Market--Affilia
(Cost $270,579) $ 887
Investments at
Market--Unaffiliated (Cost
$25,282) --
-------------------------------- ---------
Total Investments 887
Dividends Receivable --
-------------------------------- ---------
TOTAL ASSETS 887
LIABILITY--Payable to Lincoln
Life & Annuity Company of New
York --
-------------------------------- ---------
NET ASSETS $ 887
-------------------------------- =========
Percent of net assets 0.29%
-------------------------------- =========
NET ASSETS ARE REPRESENTED BY:
Units in accumulation period 75
Unit value $ 11.798
-------------------------------- ---------
NET ASSETS $ 887
-------------------------------- =========
</TABLE>
See accompanying notes.
R-4
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITY (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS MFS AMT TEMPLETON TEMPLETON
EMERGING TOTAL MFS MID-CAP AMT INTERNATIONAL STOCK
GROWTH RETURN UTILITIES GROWTH PARTNERS CLASS 2 CLASS 2
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments at
Market--Affiliated (Cost
$270,579) $ -- $ -- $ -- $ -- $ -- $ -- $ --
Investments at
Market--Unaffiliated (Cost
$25,282) 1,198 786 2,817 1,134 848 2,002 3,910
-------------------------------- --------- --------- --------- --------- --------- ----------- ---------
Total Investments 1,198 786 2,817 1,134 848 2,002 3,910
Dividends Receivable -- -- -- -- -- -- --
-------------------------------- --------- --------- --------- --------- --------- ----------- ---------
TOTAL ASSETS 1,198 786 2,817 1,134 848 2,002 3,910
LIABILITY--Payable to Lincoln
Life & Annuity Company of New
York -- -- -- -- -- -- --
-------------------------------- --------- --------- --------- --------- --------- ----------- ---------
NET ASSETS $ 1,198 $ 786 $ 2,817 $ 1,134 $ 848 $ 2,002 $ 3,910
-------------------------------- ========= ========= ========= ========= ========= =========== =========
Percent of net assets 0.40% 0.26% 0.94% 0.38% 0.28% 0.66% 1.30%
-------------------------------- ========= ========= ========= ========= ========= =========== =========
NET ASSETS ARE REPRESENTED BY:
Units in accumulation period 75 75 234 75 75 172 326
Unit value $ 15.925 $ 10.443 $ 12.043 $ 15.081 $ 11.270 $ 11.610 $ 11.994
-------------------------------- --------- --------- --------- --------- --------- ----------- ---------
NET ASSETS $ 1,198 $ 786 $ 2,817 $ 1,134 $ 848 $ 2,002 $ 3,910
-------------------------------- ========= ========= ========= ========= ========= =========== =========
</TABLE>
See accompanying notes.
R-5
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
AIM V.I. BARON
AIM V.I. INTERNATIONAL AIM V.I. CAPITAL BT EAFE
GROWTH EQUITY VALUE ASSET EQUITY INDEX
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
PERIOD FROM OCTOBER 1, 1999
TO DECEMBER 31, 1999
Net Investment Income (Loss):
Dividends from investment income $ 445 $ 2 $ 7 $ 3 $ -- $ 14
Dividends from net realized gains
on investments 134 33 29 13 -- 26
Mortality and expense guarantees (92) (2) (1) (2) (1) (1)
----------------------------------- ------ ---- ---- ---- ---- ----
NET INVESTMENT INCOME (LOSS) 487 33 35 14 (1) 39
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain (loss) on
investments 181 4 10 4 8 5
Net change in unrealized
appreciation or depreciation on
investments 5,271 240 267 225 196 93
----------------------------------- ------ ---- ---- ---- ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 5,452 244 277 229 204 98
----------------------------------- ------ ---- ---- ---- ---- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $5,939 $277 $312 $243 $203 $137
----------------------------------- ====== ==== ==== ==== ==== ====
<CAPTION>
BT EQUITY BT SMALL
500 INDEX CAP INDEX
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
--------------------------------
PERIOD FROM OCTOBER 1, 1999
TO DECEMBER 31, 1999
Net Investment Income (Loss):
Dividends from investment income $ 14 $ 9
Dividends from net realized gain
on investments 7 26
Mortality and expense guarantees (2) (1)
-------------------------------- ---- ----
NET INVESTMENT INCOME (LOSS) 19 34
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain (loss) on
investments 3 7
Net change in unrealized
appreciation or depreciation
investments 141 137
-------------------------------- ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 144 144
-------------------------------- ---- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATI $163 $178
-------------------------------- ==== ====
</TABLE>
See accompanying notes.
R-6
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS (CONTINUED)
PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DELAWARE DELAWARE
DELAWARE DELAWARE PREMIUM PREMIUM DELAWARE DELAWARE
PREMIUM PREMIUM EMERGING SMALL CAP PREMIUM PREMIUM
DELCHESTER DEVON MARKETS VALUE REIT TREND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
PERIOD FROM OCTOBER 1, 1999
TO DECEMBER 31, 1999
Net Investment Income (Loss):
Dividends from investment income $17 $-- $ -- $-- $-- $ --
Dividends from net realized gains
on investments -- -- -- -- -- --
Mortality and expense guarantees (1) (1) (1) (1) (1) (1)
----------------------------------- --- --- ---- --- --- ----
NET INVESTMENT INCOME (LOSS) 16 (1) (1) (1) (1) (1)
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain (loss) on
investments -- 3 7 2 -- 12
Net change in unrealized
appreciation or depreciation on
investments (1) 47 181 46 32 286
----------------------------------- --- --- ---- --- --- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (1) 50 188 48 32 298
----------------------------------- --- --- ---- --- --- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $15 $49 $187 $47 $31 $297
----------------------------------- === === ==== === === ====
<CAPTION>
FIDELITY
FIDELITY VIP III
VIP II GROWTH
CONTRAFUND OPPORTUNITIES
SERVICE CLASS SERVICE CLASS
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
--------------------------------
PERIOD FROM OCTOBER 1, 1999
TO DECEMBER 31, 1999
Net Investment Income (Loss):
Dividends from investment income $ -- $--
Dividends from net realized gain
on investments -- --
Mortality and expense guarantees (1) (1)
-------------------------------- ---- ---
NET INVESTMENT INCOME (LOSS) (1) (1)
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain (loss) on
investments 7 4
Net change in unrealized
appreciation or depreciation
investments 156 68
-------------------------------- ---- ---
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 163 72
-------------------------------- ---- ---
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATI $162 $71
-------------------------------- ==== ===
</TABLE>
See accompanying notes.
R-7
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS (CONTINUED)
PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
JANUS ASPEN
JANUS ASPEN SERIES LN LN LN GLOBAL
SERIES WORLDWIDE CAPITAL EQUITY- ASSET
BALANCED GROWTH LN BOND APPRECIATION INCOME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
PERIOD FROM OCTOBER 1, 1999
TO DECEMBER 31, 1999
Net Investment Income (Loss):
Dividends from investment income $ 9 $ -- $ 48 $ -- $ 5 $ 6
Dividends from net realized gains
on investments -- -- -- -- -- --
Mortality and expense guarantees (1) (2) (2) (2) (2) (1)
----------------------------------- ---- ---- ---- ---- ---- ---
NET INVESTMENT INCOME (LOSS) 8 (2) 46 (2) 3 5
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain (loss) on
investments 6 5 (1) 5 3 4
Net change in unrealized
appreciation or depreciation on
investments 122 418 (47) 273 144 81
----------------------------------- ---- ---- ---- ---- ---- ---
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 128 423 (48) 278 147 85
----------------------------------- ---- ---- ---- ---- ---- ---
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $136 $421 $ (2) $276 $150 $90
----------------------------------- ==== ==== ==== ==== ==== ===
<CAPTION>
LN MONEY LN SOCIAL
MARKET AWARENESS
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
--------------------------------
PERIOD FROM OCTOBER 1, 1999
TO DECEMBER 31, 1999
Net Investment Income (Loss):
Dividends from investment income $306 $ 5
Dividends from net realized gain
on investments -- --
Mortality and expense guarantees (47) (1)
-------------------------------- ---- ----
NET INVESTMENT INCOME (LOSS) 259 4
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain (loss) on
investments -- 6
Net change in unrealized
appreciation or depreciation
investments -- 132
-------------------------------- ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS -- 138
-------------------------------- ---- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATI $259 $142
-------------------------------- ==== ====
</TABLE>
See accompanying notes.
R-8
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS (CONTINUED)
PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS AMT TEMPLETON TEMPLETON
EMERGING MFS TOTAL MFS MID-CAP AMT INTERNATIONAL STOCK
GROWTH RETURN UTILITIES GROWTH PARTNERS CLASS 2 CLASS 2
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM OCTOBER 1, 1999
TO DECEMBER 31, 1999
Net Investment Income (Loss):
Dividends from investment income $ -- $-- $ -- $ -- $ -- $ -- $ --
Dividends from net realized
gains on investments -- -- -- -- -- -- --
Mortality and expense guarantees (2) (1) (2) (2) (1) (2) (6)
-------------------------------- ---- --- ---- ---- ---- ---- ----
NET INVESTMENT INCOME (LOSS) (2) (1) (2) (2) (1) (2) (6)
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain (loss) on
investments 17 2 3 17 6 2 30
Net change in unrealized
appreciation or depreciation
on investments 447 34 243 383 97 175 655
-------------------------------- ---- --- ---- ---- ---- ---- ----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS 464 36 246 400 103 177 685
-------------------------------- ---- --- ---- ---- ---- ---- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $462 $35 $244 $398 $102 $175 $679
-------------------------------- ==== === ==== ==== ==== ==== ====
</TABLE>
See accompanying notes.
R-9
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
AIM V.I. BARON BT EAFE
AIM V.I. INTERNATIONAL AIM V.I. CAPITAL EQUITY BT EQUITY
GROWTH EQUITY VALUE ASSET INDEX 500 INDEX
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
Changes From Operations:
Net investment income (loss) $ 487 $ 33 $ 35 $ 14 $ (1) $ 39 $ 19
Net realized gain (loss) on
investments 181 4 10 4 8 5 3
Net change in unrealized
appreciation or depreciation on
investments 5,271 240 267 225 196 93 141
----------------------------------- -------- ------ ------ ------ ---- ---- ------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 5,939 277 312 243 203 137 163
Change From Unit Transactions:
Participant purchases 323,723 2,807 900 2,793 900 900 2,230
Participant withdrawals (28,534) (235) (159) (233) (156) (153) (208)
----------------------------------- -------- ------ ------ ------ ---- ---- ------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT TRANSACTIONS 295,189 2,572 741 2,560 744 747 2,022
----------------------------------- -------- ------ ------ ------ ---- ---- ------
TOTAL INCREASE IN NET ASSETS 301,128 2,849 1,053 2,803 947 884 2,185
----------------------------------- -------- ------ ------ ------ ---- ---- ------
NET ASSETS AT DECEMBER 31, 1999 $301,128 $2,849 $1,053 $2,803 $947 $884 $2,185
----------------------------------- ======== ====== ====== ====== ==== ==== ======
<CAPTION>
BT SMALL
CAP INDEX
SUBACCOUNT
<S> <C>
--------------------------------
Changes From Operations:
Net investment income (loss) $ 34
Net realized gain (loss) on
investments 7
Net change in unrealized
appreciation or depreciation o
investments 137
-------------------------------- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATI 178
Change From Unit Transactions:
Participant purchases 901
Participant withdrawals (155)
-------------------------------- ----
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT TRANSACTI 746
-------------------------------- ----
TOTAL INCREASE IN NET ASSETS 924
-------------------------------- ----
NET ASSETS AT DECEMBER 31, 1999 $924
-------------------------------- ====
</TABLE>
See accompanying notes.
R-10
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DELAWARE DELAWARE
DELAWARE DELAWARE PREMIUM PREMIUM DELAWARE DELAWARE
PREMIUM PREMIUM EMERGING SMALL CAP PREMIUM PREMIUM
DELCHESTER DEVON MARKETS VALUE REIT TREND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Changes From Operations:
Net investment income (loss) $ 16 $ (1) $ (1) $ (1) $ (1) $ (1)
Net realized gain (loss) on
investments -- 3 7 2 -- 12
Net change in unrealized
appreciation or depreciation on
investments (1) 47 181 46 32 286
----------------------------------- ---- ---- ---- ---- ---- ------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 15 49 187 47 31 297
Change From Unit Transactions:
Participant purchases 900 900 899 900 900 899
Participant withdrawals (149) (151) (154) (150) (148) (159)
----------------------------------- ---- ---- ---- ---- ---- ------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT TRANSACTIONS 751 749 745 750 752 740
----------------------------------- ---- ---- ---- ---- ---- ------
TOTAL INCREASE IN NET ASSETS 766 798 932 797 783 1,037
----------------------------------- ---- ---- ---- ---- ---- ------
NET ASSETS AT DECEMBER 31, 1999 $766 $798 $932 $797 $783 $1,037
----------------------------------- ==== ==== ==== ==== ==== ======
<CAPTION>
FIDELITY
FIDELITY VIP III
VIP II GROWTH
CONTRAFUND OPPORTUNITIES
SERVICE CLASS SERVICE CLASS
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
--------------------------------
Changes From Operations:
Net investment income (loss) $ (1) $ (1)
Net realized gain (loss) on
investments 7 4
Net change in unrealized
appreciation or depreciation o
investments 156 68
-------------------------------- ---- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATI 162 71
Change From Unit Transactions:
Participant purchases 900 900
Participant withdrawals (155) (152)
-------------------------------- ---- ----
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT TRANSACTI 745 748
-------------------------------- ---- ----
TOTAL INCREASE IN NET ASSETS 907 819
-------------------------------- ---- ----
NET ASSETS AT DECEMBER 31, 1999 $907 $819
-------------------------------- ==== ====
</TABLE>
See accompanying notes.
R-11
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
JANUS ASPEN
JANUS ASPEN SERIES LN LN LN GLOBAL
SERIES WORLDWIDE CAPITAL EQUITY- ASSET
BALANCED GROWTH LN BOND APPRECIATION INCOME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Changes From Operations:
Net investment income (loss) $ 8 $ (2) $ 46 $ (2) $ 3 $ 5
Net realized gain (loss) on
investments 6 5 (1) 5 3 4
Net change in unrealized
appreciation or depreciation on
investments 122 418 (47) 273 144 81
----------------------------------- ---- ------ ------ ------ ------ ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 136 421 (2) 276 150 90
Change From Unit Transactions:
Participant purchases 901 2,224 4,663 2,806 2,800 900
Participant withdrawals (154) (215) (305) (235) (230) (152)
----------------------------------- ---- ------ ------ ------ ------ ----
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT TRANSACTIONS 747 2,009 4,358 2,571 2,570 748
----------------------------------- ---- ------ ------ ------ ------ ----
TOTAL INCREASE IN NET ASSETS 883 2,430 4,356 2,847 2,720 838
----------------------------------- ---- ------ ------ ------ ------ ----
NET ASSETS AT DECEMBER 31, 1999 $883 $2,430 $4,356 $2,847 $2,720 $838
----------------------------------- ==== ====== ====== ====== ====== ====
<CAPTION>
LN MONEY LN SOCIAL
MARKET AWARENESS
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
--------------------------------
Changes From Operations:
Net investment income (loss) $ 259 $ 4
Net realized gain (loss) on
investments -- 6
Net change in unrealized
appreciation or depreciation o
investments -- 132
-------------------------------- -------- ----
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATI 259 142
Change From Unit Transactions:
Participant purchases 277,563 899
Participant withdrawals (22,834) (154)
-------------------------------- -------- ----
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT TRANSACTI 254,729 745
-------------------------------- -------- ----
TOTAL INCREASE IN NET ASSETS 254,988 887
-------------------------------- -------- ----
NET ASSETS AT DECEMBER 31, 1999 $254,988 $887
-------------------------------- ======== ====
</TABLE>
See accompanying notes.
R-12
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS AMT TEMPLETON TEMPLETON
EMERGING MFS TOTAL MFS MID-CAP AMT INTERNATIONAL STOCK
GROWTH RETURN UTILITIES GROWTH PARTNERS CLASS 2 CLASS 2
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
Changes From Operations:
Net investment income (loss) $ (2) $ (1) $ (2) $ (2) $ (1) $ (2) $ (6)
Net realized gain (loss) on
investments 17 2 3 17 6 2 30
Net change in unrealized
appreciation or depreciation
on investments 447 34 243 383 97 175 655
-------------------------------- ------ ---- ------ ------ ---- ------ ------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS 462 35 244 398 102 175 679
Change From Unit Transactions:
Participant purchases 901 901 2,805 901 899 2,030 3,901
Participant withdrawals (165) (150) (232) (165) (153) (203) (670)
-------------------------------- ------ ---- ------ ------ ---- ------ ------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT
TRANSACTIONS 736 751 2,573 736 746 1,827 3,231
-------------------------------- ------ ---- ------ ------ ---- ------ ------
TOTAL INCREASE IN NET ASSETS 1,198 786 2,817 1,134 848 2,002 3,910
-------------------------------- ------ ---- ------ ------ ---- ------ ------
NET ASSETS AT DECEMBER 31, 1999 $1,198 $786 $2,817 $1,134 $848 $2,002 $3,910
-------------------------------- ====== ==== ====== ====== ==== ====== ======
</TABLE>
See accompanying notes.
R-13
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND VARIABLE ACCOUNT INFORMATION
THE VARIABLE ACCOUNT:
LLANY Separate Account R for Flexible Premium Variable Life
Insurance (the Variable Account) is a segregated investment
account of Lincoln Life & Annuity Company of New York
(Lincoln Life New York) and is registered as a unit
investment trust with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended. The
operations of the Variable Account, which commenced on
October 1, 1999, are part of the operations of Lincoln Life
New York.
The assets of the Variable Account are owned by Lincoln Life
New York. The portion of the Variable Account's assets
supporting the variable life policies may not be used to
satisfy liabilities arising from any other business of
Lincoln Life New York.
BASIS OF PRESENTATION:
The accompanying financial statements have been prepared in
accordance with accounting principles generally accepted in
the United States for unit investment trusts.
INVESTMENTS:
The assets of the Variable Account are divided into variable
subaccounts each of which is invested in shares of one of
thirty portfolios of eleven diversified open-end management
investment companies, each portfolio with its own investment
objective. The variable subaccounts are:
AIM Variable Insurance Funds, Inc.:
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Baron Capital Funds Trust:
Baron Capital Asset Fund
BT Insurance Funds Trust:
EAFE Equity Index Fund
Equity 500 Index Fund
Small Cap Index Fund
Delaware Group Premium Fund, Inc.:
Delchester Series
Devon Series
Emerging Markets Series
REIT Series
Small Cap Value Series
Trend Series
Fidelity Variable Insurance Products Fund II:
Contrafund Service Class Portfolio
Fidelity Variable Insurance Products Fund III:
Growth Opportunities Service Class Portfolio
Janus Aspen Series:
Janus Aspen Series Balanced Portfolio
Janus Aspen Series Worldwide Growth Portfolio
Lincoln National (LN):
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc.
LN Equity-Income Fund, Inc.
R-14
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES AND VARIABLE ACCOUNT INFORMATION (CONTINUED)
LN Global Asset Allocation Fund, Inc.
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc.
MFS Variable Insurance Trust:
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
Neuberger Berman Advisers Management Trust (AMT):
AMT Mid-Cap Growth Portfolio
AMT Partners Portfolio
Templeton Variable Products Series Fund:
Templeton International Class 2 Fund
Templeton Stock Class 2 Fund
Investments in the variable subaccounts are stated at the
closing net asset value per share on December 31, 1999,
which approximates fair value. The difference between cost
and fair value is reflected as unrealized appreciation and
depreciation of investments.
Investment transactions are accounted for on a trade date
basis. The cost of investments sold is determined by the
average cost method.
DIVIDENDS:
Dividends paid to the Variable Account are automatically
reinvested in shares of the variable subaccounts on the
payable date. Dividend income is recorded on the ex-dividend
date.
FEDERAL INCOME TAXES:
Operations of the Variable Account form a part of and are
taxed with operations of Lincoln Life New York, which is
taxed as a "life insurance company" under the Internal
Revenue Code. The Variable Account will not be taxed as a
regulated investment company under Subchapter M of the
Internal Revenue Code. Using current federal income tax law,
no federal income taxes are payable with respect to the
Variable Account's net investment income and the net
realized gain on investments.
R-15
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. MORTALITY AND EXPENSE GUARANTEES & OTHER TRANSACTIONS WITH AFFILIATE
Amounts are paid to Lincoln Life New York for mortality and
expense guarantees at a percentage of the current value of
the Variable Account each day. The current rate of
deduction, stated as an annual percentage, is .80%. The
mortality and expense risk charges for each of the variable
subaccounts are reported in the statement of operations.
Prior to the allocation of premiums to the Variable Account,
Lincoln Life New York deducts a premium load of 8% of each
premium payment to cover state taxes and federal income tax
liabilities and a portion of the sales expenses incurred by
Lincoln Life New York. The premium loads for the period
ended December 31, 1999 amounted to $24,680.
Lincoln Life New York charges a monthly administrative fee
of $12.50 in the first policy year and $5 in subsequent
policy years. In addition, there is a monthly charge of
$0.09 per $1,000 of specified amount for the first twenty
years of the policy and for the first twenty years following
an increase in specified amount. If the no lapse provision
is in effect there will also be a monthly charge of $0.01
per $1,000 of specified amount. This charge is for items
such as premium billing and collection, policy value
calculation, confirmations and periodic reports.
Administrative fees for the period ended December 31, 1999
totaled $3,732.
Lincoln Life New York assumes responsibility for providing
the insurance benefit included in the policy. Lincoln Life
New York charges a monthly deduction of the cost of
insurance and any charges for supplemental riders. The cost
of insurance charge depends on the attained age, risk
classification, gender classification (in accordance with
state law) and the current net amount at risk. On a monthly
basis, the administrative fee and the cost of insurance
charge are deducted proportionately for the value of each
variable subaccount and/or fixed account funding options.
The fixed account is part of the general account of Lincoln
Life New York and is not included in these financial
statements. The cost of insurance charges for the period
ended December 31, 1999 amounted to $108.
Under certain circumstances, Lincoln Life reserves the right
to charge a transfer fee of $25 for each transfer after the
twelfth transfer per year between variable subaccounts. For
the period ended December 31, 1999, no transfer fees were
deducted from the variable subaccounts.
Lincoln Life New York, upon full surrender of a policy, may
charge a surrender charge. This charge is in part a deferred
sales charge and in part a recovery of certain first year
administrative costs. The amount of the surrender charge, if
any, will depend on the face amount of the policy and the
issue age of the policy. In no event will the surrender
charge exceed the maximum allowed by state or federal law.
No surrender charge is imposed on a partial surrender, but
an administrative fee of $25 is imposed, allocated pro-rata
among the variable subaccounts (and, where applicable, the
fixed account) from which the partial surrender proceeds are
taken. For the period ended December 31, 1999, no surrender
charges and partial surrender administrative charges were
paid to Lincoln Life New York, attributable to the variable
subaccounts.
R-16
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. NET ASSETS
The following is a summary of net assets owned at December 31,
1999.
<TABLE>
<CAPTION>
AIM V.I. BARON BT EAFE
AIM V.I. INTERNATIONAL AIM V.I. CAPITAL EQUITY
GROWTH EQUITY VALUE ASSET INDEX
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
- -----------------------------------
Accumulation units $295,189 $2,572 $ 741 $2,560 $744 $747
- ----------------------------------- -------- ------ ------ ------ ---- ----
Accumulated net investment income
(loss) 487 33 35 14 (1) 39
- ----------------------------------- -------- ------ ------ ------ ---- ----
Accumulated net realized gain
(loss) on investments 181 4 10 4 8 5
- ----------------------------------- -------- ------ ------ ------ ---- ----
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS 5,271 240 267 225 196 93
-------- ------ ------ ------ ---- ----
$301,128 $2,849 $1,053 $2,803 $947 $884
======== ====== ====== ====== ==== ====
<CAPTION>
BT EQUITY BT SMALL
500 INDEX CAP INDEX
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
- -----------------------------------
UNIT TRANSACTIONS:
- -----------------------------------
Accumulation units $2,022 $746
- ----------------------------------- ------ ----
Accumulated net investment income
(loss) 19 34
- ----------------------------------- ------ ----
Accumulated net realized gain
(loss) on investments 3 7
- ----------------------------------- ------ ----
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS 141 137
------ ----
$2,185 $924
====== ====
</TABLE>
<TABLE>
<CAPTION>
DELAWARE DELAWARE
DELAWARE DELAWARE PREMIUM PREMIUM DELAWARE DELAWARE
PREMIUM PREMIUM EMERGING SMALL CAP PREMIUM PREMIUM
DELCHESTER DEVON MARKETS VALUE REIT TREND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
- -----------------------------------
Accumulation units $751 $749 $745 $750 $752 $ 740
- ----------------------------------- ---- ---- ---- ---- ---- ------
Accumulated net investment income
(loss) 16 (1) (1) (1) (1) (1)
- ----------------------------------- ---- ---- ---- ---- ---- ------
Accumulated net realized gain
(loss) on investments -- 3 7 2 -- 12
- ----------------------------------- ---- ---- ---- ---- ---- ------
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS (1) 47 181 46 32 286
---- ---- ---- ---- ---- ------
$766 $798 $932 $797 $783 $1,037
==== ==== ==== ==== ==== ======
<CAPTION>
FIDELITY
FIDELITY VIP III
VIP II GROWTH
CONTRAFUND OPPORTUNITIES
SERVICE CLASS SERVICE CLASS
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
- -----------------------------------
UNIT TRANSACTIONS:
- -----------------------------------
Accumulation units $745 $748
- ----------------------------------- ---- ----
Accumulated net investment income
(loss) (1) (1)
- ----------------------------------- ---- ----
Accumulated net realized gain
(loss) on investments 7 4
- ----------------------------------- ---- ----
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS 156 68
---- ----
$907 $819
==== ====
</TABLE>
R-17
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
JANUS
JANUS ASPEN
ASPEN SERIES LN GLOBAL
SERIES WORLDWIDE LN CAPITAL LN EQUITY- ASSET
BALANCED GROWTH LN BOND APPRECIATION INCOME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
- -----------------------------------
Accumulation units $747 $2,009 $4,358 $2,571 $2,570 $748
- ----------------------------------- ---- ------ ------ ------ ------ ----
Accumulated net investment income
(loss) 8 (2) 46 (2) 3 5
- ----------------------------------- ---- ------ ------ ------ ------ ----
Accumulated net realized gain
(loss) on investments 6 5 (1) 5 3 4
- ----------------------------------- ---- ------ ------ ------ ------ ----
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS 122 418 (47) 273 144 81
---- ------ ------ ------ ------ ----
$883 $2,430 $4,356 $2,847 $2,720 $838
==== ====== ====== ====== ====== ====
<CAPTION>
LN MONEY LN SOCIAL
MARKET AWARENESS
SUBACCOUNT SUBACCOUNT
<S> <C> <C>
- -----------------------------------
UNIT TRANSACTIONS:
- -----------------------------------
Accumulation units $254,729 $745
- ----------------------------------- -------- ----
Accumulated net investment income
(loss) 259 4
- ----------------------------------- -------- ----
Accumulated net realized gain
(loss) on investments -- 6
- ----------------------------------- -------- ----
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS -- 132
-------- ----
$254,988 $887
======== ====
</TABLE>
<TABLE>
<CAPTION>
MFS AMT TEMPLETON TEMPLETON
EMERGING MFS TOTAL MFS MID-CAP AMT INTERNATIONAL STOCK
GROWTH RETURN UTILITIES GROWTH PARTNERS CLASS 2 CLASS 2
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
- ----------------------------
Accumulation units $ 736 $751 $2,573 $ 736 $746 $1,827 $3,231
- ---------------------------- ------ ---- ------ ------ ---- ------ ------
Accumulated net investment
income (loss) (2) (1) (2) (2) (1) (2) (6)
- ---------------------------- ------ ---- ------ ------ ---- ------ ------
Accumulated net realized
gain (loss) on investments 17 2 3 17 6 2 30
- ---------------------------- ------ ---- ------ ------ ---- ------ ------
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON
INVESTMENTS 447 34 243 383 97 175 655
------ ---- ------ ------ ---- ------ ------
$1,198 $786 $2,817 $1,134 $848 $2,002 $3,910
====== ==== ====== ====== ==== ====== ======
</TABLE>
R-18
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and the
aggregate proceeds from investments sold were as follows for
1999.
<TABLE>
<CAPTION>
AGGREGATE
AGGREGATE COST PROCEEDS FROM
OF PURCHASES SALES
----------------------------------
<S> <C> <C>
AIM V.I. Growth Fund $ 2,635 $ 30
------------------------------------------------------------
AIM V.I. International Equity Fund 837 61
------------------------------------------------------------
AIM V.I. Value Fund 2,603 29
------------------------------------------------------------
Baron Capital Asset Fund 801 58
------------------------------------------------------------
BT EAFE Equity Index Fund 841 55
------------------------------------------------------------
BT Equity 500 Index Fund 2,069 28
------------------------------------------------------------
BT Small Cap Index Fund 836 56
------------------------------------------------------------
Delaware Premium Delchester Series 815 50
------------------------------------------------------------
Delaware Premium Devon Series 801 53
------------------------------------------------------------
Delaware Premium Emerging Markets Series 801 57
------------------------------------------------------------
Delaware Premium Small Cap Value Series 801 52
------------------------------------------------------------
Delaware Premium REIT Series 801 50
------------------------------------------------------------
Delaware Premium Trend Series 801 62
------------------------------------------------------------
Fidelity VIP II Contrafund Service Class Portfolio 801 57
------------------------------------------------------------
Fidelity VIP III Growth Opportunities Service
Class Portfolio 801 54
------------------------------------------------------------
Janus Aspen Series Balanced Portfolio 810 55
------------------------------------------------------------
Janus Aspen Series Worldwide Growth Portfolio 2,038 31
------------------------------------------------------------
LN Bond Fund 4,429 25
------------------------------------------------------------
LN Capital Appreciation Fund 2,599 30
------------------------------------------------------------
LN Equity-Income Fund 2,601 28
------------------------------------------------------------
LN Global Asset Allocation Fund 806 53
------------------------------------------------------------
LN Money Market Fund 255,014 20
------------------------------------------------------------
LN Social Awareness Fund 806 57
------------------------------------------------------------
MFS Emerging Growth Series 801 67
------------------------------------------------------------
MFS Total Return Series 801 51
------------------------------------------------------------
MFS Utilities Series 2,598 27
------------------------------------------------------------
AMT Mid-Cap Growth Portfolio 801 67
------------------------------------------------------------
AMT Partners Portfolio 801 56
------------------------------------------------------------
Templeton International Class 2 Fund 1,852 27
------------------------------------------------------------
Templeton Stock Class 2 Fund 3,469 244
------------------------------------------------------------
-------- ------
$297,270 $1,590
======== ======
</TABLE>
R-19
<PAGE>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENTS
The following is a summary of investments owned at
December 31, 1999.
<TABLE>
<CAPTION>
NET
SHARES ASSET VALUE OF
OUTSTANDING VALUE SHARES COST OF SHARES
------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund 88 $32.25 $ 2,849 $ 2,609
------------------------------------------------------------
AIM V.I. International Equity Fund 36 29.29 1,053 786
------------------------------------------------------------
AIM V.I. Value Fund 84 33.50 2,803 2,578
------------------------------------------------------------
Baron Capital Asset Fund 53 17.77 947 751
------------------------------------------------------------
BT EAFE Equity Index Fund 65 13.60 884 791
------------------------------------------------------------
BT Equity 500 Index Fund 144 15.18 2,185 2,044
------------------------------------------------------------
BT Small Cap Index Fund 80 11.61 924 787
------------------------------------------------------------
Delaware Premium Delchester Series 103 7.42 764 765
------------------------------------------------------------
Delaware Premium Devon Series 59 13.62 798 751
------------------------------------------------------------
Delaware Premium Emerging Markets Series 111 8.40 932 751
------------------------------------------------------------
Delaware Premium Small Cap Value Series 52 15.36 797 751
------------------------------------------------------------
Delaware Premium REIT Series 90 8.67 783 751
------------------------------------------------------------
Delaware Premium Trend Series 31 33.66 1,037 751
------------------------------------------------------------
Fidelity VIP II Contrafund Service Class Portfolio 31 29.10 907 751
------------------------------------------------------------
Fidelity VIP III Growth Opportunities Service
Class Portfolio 35 23.12 819 751
------------------------------------------------------------
Janus Aspen Series Balanced Portfolio 32 27.92 883 761
------------------------------------------------------------
Janus Aspen Series Worldwide Growth Portfolio 51 47.75 2,430 2,012
------------------------------------------------------------
LN Bond Fund 381 11.44 4,356 4,403
------------------------------------------------------------
LN Capital Appreciation Fund 90 31.47 2,847 2,574
------------------------------------------------------------
LN Equity-Income Fund 123 22.05 2,720 2,576
------------------------------------------------------------
LN Global Asset Allocation Fund 50 16.79 838 757
------------------------------------------------------------
LN Money Market Fund 25,501 10.00 254,994 254,994
------------------------------------------------------------
LN Social Awareness Fund 20 44.29 887 755
------------------------------------------------------------
MFS Emerging Growth Series 32 37.94 1,198 751
------------------------------------------------------------
MFS Total Return Series 44 17.75 786 752
------------------------------------------------------------
MFS Utilities Series 117 24.16 2,817 2,574
------------------------------------------------------------
AMT Mid-Cap Growth Portfolio 47 24.30 1,134 751
------------------------------------------------------------
AMT Partners Portfolio 43 19.64 848 751
------------------------------------------------------------
Templeton International Class 2 Fund 90 22.13 2,002 1,827
------------------------------------------------------------
Templeton Stock Class 2 Fund 161 24.29 3,910 3,255
------------------------------------------------------------ -------- --------
$301,132 $295,861
======== ========
</TABLE>
R-20
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Directors of Lincoln Life & Annuity Company of New York
and
Contract Owners of LLANY Separate Account R for Flexible Premium
Variable Life Insurance
We have audited the accompanying statement of assets and
liability of LLANY Separate Account R for Flexible Premium
Variable Life Insurance ("Variable Account") (comprised of the
AIM V.I. Growth, AIM V.I. International Equity, AIM V.I. Value,
Baron Capital Asset, BT EAFE Equity Index, BT Equity 500 Index,
BT Small Cap Index, Delaware Premium Delchester, Delaware
Premium Devon, Delaware Premium Emerging Markets, Delaware
Premium Small Cap Value, Delaware Premium REIT, Delaware Premium
Trend, Fidelity VIP II Contrafund Service Class, Fidelity VIP
III Growth Opportunities Service Class, Janus Aspen
Series Balanced, Janus Aspen Series Worldwide Growth, Lincoln
National Bond, Lincoln National Capital Appreciation, Lincoln
National Equity-Income, Lincoln National Global Asset
Allocation, Lincoln National Money Market, Lincoln National
Social Awareness, MFS Emerging Growth, MFS Total Return, MFS
Utilities, Neuberger Berman Advisers Management Trust (AMT)
Mid-Cap Growth, Neuberger Berman Advisers Management Trust (AMT)
Partners, Templeton Variable Products International Class 2 and
Templeton Variable Products Stock Class 2 subaccounts), as of
December 31, 1999, and the related statement of operations and
changes in net assets for the period from October 1, 1999 to
December 31, 1999. These financial statements are the
responsibility of the Variable Account's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
investments owned as of December 31, 1999, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of each of the respective subaccounts constituting the LLANY
Separate Account R for Flexible Premium Variable Life Insurance
at December 31, 1999, and the results of their operations and
the changes in their net assets for the period from October 1,
1999 to December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Fort Wayne, Indiana
March 24, 2000
R-21
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
BALANCE SHEETS -- STATUTORY BASIS
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------- --------------
<S> <C> <C>
ADMITTED ASSETS
CASH AND INVESTED ASSETS:
Bonds $1,482,592,831 $1,435,882,019
- ------------------------------------------------------------
Unaffiliated common stocks 161,005 155,039
- ------------------------------------------------------------
Mortgage loans on real estate 197,425,386 184,503,805
- ------------------------------------------------------------
Policy loans 177,437,149 170,372,567
- ------------------------------------------------------------
Cash and short-term investments 29,467,267 143,546,873
- ------------------------------------------------------------
Other invested assets 223,126 60,000
- ------------------------------------------------------------
Receivable for securities 1,313,866 3,477,120
- ------------------------------------------------------------ -------------- --------------
Total cash and invested assets 1,888,620,630 1,937,997,423
- ------------------------------------------------------------
Premiums and fees in course of collection 6,578,363 6,959,116
- ------------------------------------------------------------
Accrued investment income 29,296,814 25,925,055
- ------------------------------------------------------------
Other admitted assets 38,442,338 438,335
- ------------------------------------------------------------
Separate account assets 328,767,871 236,861,781
- ------------------------------------------------------------ -------------- --------------
Total admitted assets $2,291,706,016 $2,208,181,710
- ------------------------------------------------------------ ============== ==============
LIABILITIES AND CAPITAL AND SURPLUS
LIABILITIES:
Future policy benefits and claims $ 853,572,463 $ 851,746,596
- ------------------------------------------------------------
Other policyholder funds 951,347,964 962,725,311
- ------------------------------------------------------------
Other liabilities 25,045,378 44,824,520
- ------------------------------------------------------------
Federal income taxes recoverable -- (3,206,611)
- ------------------------------------------------------------
Asset valuation reserve 7,884,503 5,374,594
- ------------------------------------------------------------
Interest maintenance reserve 956,570 5,051,304
- ------------------------------------------------------------
Net transfers due from separate accounts (8,262,299) (6,915,063)
- ------------------------------------------------------------
Separate account liabilities 328,767,871 236,861,781
- ------------------------------------------------------------ -------------- --------------
Total liabilities 2,159,312,450 2,096,462,432
- ------------------------------------------------------------
CAPITAL AND SURPLUS:
Common stock, $100 par value:
Authorized, issued and outstanding -- 20,000 shares (owned
by The Lincoln National Life Insurance Company) 2,000,000 2,000,000
- ------------------------------------------------------------
Paid-in surplus 384,128,481 384,128,481
- ------------------------------------------------------------
Unassigned surplus -- deficit (253,734,915) (274,409,203)
- ------------------------------------------------------------ -------------- --------------
Total capital and surplus 132,393,566 111,719,278
- ------------------------------------------------------------ -------------- --------------
Total liabilities and capital and surplus $2,291,706,016 $2,208,181,710
- ------------------------------------------------------------ ============== ==============
</TABLE>
See accompanying notes. S-1
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------ -------------- ------------
<S> <C> <C> <C>
PREMIUMS AND OTHER REVENUES:
Premiums and deposits $172,708,594 $1,291,566,984 $184,112,330
- ------------------------------------------------------------
Net investment income 132,213,228 105,083,579 43,953,796
- ------------------------------------------------------------
Surrender and administrative charges 2,401,973 2,834,073 1,334,705
- ------------------------------------------------------------
Mortality and expense charges on deposit funds 2,937,632 1,980,728 1,548,722
- ------------------------------------------------------------
Amortization of the interest maintenance reserve 925,547 579,137 370,129
- ------------------------------------------------------------
Other revenues 2,127,634 536,698 183,048
- ------------------------------------------------------------ ------------ -------------- ------------
Total revenues 313,314,608 1,402,581,199 231,502,730
- ------------------------------------------------------------
BENEFITS AND EXPENSES:
Benefits and settlement expenses 207,985,159 1,320,787,190 72,475,389
- ------------------------------------------------------------
Commissions 17,665,459 274,529,390 2,459,308
- ------------------------------------------------------------
Underwriting, insurance and other expenses 32,297,064 28,064,172 8,012,925
- ------------------------------------------------------------
Net transfers to separate accounts 28,255,807 33,875,951 141,027,195
- ------------------------------------------------------------ ------------ -------------- ------------
Total benefits and expenses 286,203,489 1,657,256,703 223,974,817
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before dividends to
policyholders, federal income taxes (benefit) and net
realized loss on investments 27,111,119 (254,675,504) 7,527,913
- ------------------------------------------------------------
Dividends to policyholders 5,624,728 3,375,629 --
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before federal income taxes
(benefit) and net realized loss on investments 21,486,391 (258,051,133) 7,527,913
- ------------------------------------------------------------
Federal income taxes (benefit) (427,033) (4,561,826) 1,942,625
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before net realized loss on
investments 21,913,424 (253,489,307) 5,585,288
- ------------------------------------------------------------
Net realized loss on investments (2,012,331) (721,449) (73,398)
- ------------------------------------------------------------ ------------ -------------- ------------
Net income (loss) $ 19,901,093 $ (254,210,756) $ 5,511,890
- ------------------------------------------------------------ ============ ============== ============
</TABLE>
See accompanying notes.
S-2
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
<TABLE>
<CAPTION>
UNASSIGNED TOTAL
COMMON PAID-IN SURPLUS -- CAPITAL AND
STOCK SURPLUS DEFICIT SURPLUS
---------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Balances at January 1, 1997 $2,000,000 $ 69,000,000 $ (20,824,003) $ 50,175,997
Add (deduct):
Surplus paid-in -- 158,407,481 -- 158,407,481
- -------------------------------------------------
Net income -- -- 5,511,890 5,511,890
- -------------------------------------------------
Increase in nonadmitted assets -- -- (21,278) (21,278)
- -------------------------------------------------
Increase in asset valuation service -- -- (1,221,863) (1,221,863)
- ------------------------------------------------- ---------- ------------ ------------- -------------
Balances at December 31, 1997 2,000,000 227,407,481 (16,555,254) 212,852,227
Add (deduct):
Surplus paid-in -- 156,721,000 -- 156,721,000
- -------------------------------------------------
Net loss -- -- (254,210,756) (254,210,756)
- -------------------------------------------------
Increase in unrealized capital losses -- -- (178,648) (178,648)
- -------------------------------------------------
Decrease in nonadmitted assets -- -- 241,698 241,698
- -------------------------------------------------
Increase in asset valuation reserve -- -- (3,024,183) (3,024,183)
- -------------------------------------------------
Increase in liability for reinsurance in
unauthorized companies -- -- (682,060) (682,060)
- ------------------------------------------------- ---------- ------------ ------------- -------------
Balances at December 31, 1998 2,000,000 384,128,481 (274,409,203) 111,719,278
Add (deduct):
Net income -- -- 19,901,093 19,901,093
- -------------------------------------------------
Increase in unrealized capital losses -- -- (939,080) (939,080)
- -------------------------------------------------
Decrease in nonadmitted assets -- -- 187,322 187,322
- -------------------------------------------------
Increase in asset valuation reserve -- -- (2,509,909) (2,509,909)
- -------------------------------------------------
Increase in liability for reinsurance in
unauthorized companies -- -- (605,340) (605,340)
- -------------------------------------------------
Gain on reinsurance transaction -- -- 4,640,202 4,640,202
- ------------------------------------------------- ---------- ------------ ------------- -------------
Balances at December 31, 1999 $2,000,000 $384,128,481 $(253,734,915) $ 132,393,566
- ------------------------------------------------- ========== ============ ============= =============
</TABLE>
See accompanying notes. S-3
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------- -------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums, policy proceeds and other considerations received $ 172,535,360 $1,284,669,810 $184,112,330
- ------------------------------------------------------------
Investment income received 138,850,106 96,331,551 43,781,378
- ------------------------------------------------------------
Benefits paid (204,263,171) (83,399,329) (85,008,691)
- ------------------------------------------------------------
Insurance expenses paid (96,041,640) (351,272,500) (154,355,904)
- ------------------------------------------------------------
Federal income taxes received (paid) (656,134) 1,703,193 (1,893,859)
- ------------------------------------------------------------
Dividends paid to policyholders (5,921,665) 2,651,237 --
- ------------------------------------------------------------
Other income received, less other expenses paid 1,653,592 39,064,672 1,613,631
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by (used in) operating activities 6,156,448 989,748,634 (11,751,115)
- ------------------------------------------------------------
INVESTING ACTIVITIES
Sale, maturity or repayment of investments 294,554,595 249,409,117 272,961,178
- ------------------------------------------------------------
Purchase of investments (369,356,711) (1,280,892,696) (265,700,363)
- ------------------------------------------------------------
Net decrease (increase) in policy loans (7,064,582) (131,317,640) 1,554,149
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by (used in) investing activities (81,866,698) (1,162,801,219) 8,814,964
- ------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Capital and surplus paid-in -- 156,721,000 158,407,481
- ------------------------------------------------------------
Other (38,369,356) (3,895,136) (11,032,743)
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by financing activities (38,369,356) 152,825,864 147,374,738
- ------------------------------------------------------------ ------------- -------------- ------------
Net increase (decrease) in cash and short-term investments (114,079,606) (20,226,721) 144,438,587
- ------------------------------------------------------------
Total cash and short-term investments at beginning of year 143,546,873 163,773,594 19,335,007
- ------------------------------------------------------------ ------------- -------------- ------------
Total cash and short-term investments at end of year $ 29,467,267 $ 143,546,873 $163,773,594
- ------------------------------------------------------------ ============= ============== ============
</TABLE>
See accompanying notes.
S-4
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
ORGANIZATION AND OPERATIONS
Lincoln Life & Annuity Company of New York (the "Company") is a wholly owned
subsidiary of The Lincoln National Life Insurance Company ("Lincoln Life"),
which is a wholly owned subsidiary of Lincoln National Corporation ("LNC").
In 1996, the Company was organized under the laws of the state of New York
as a life insurance company and received approval from the New York
Insurance Department (the "Department") to operate as a licensed insurance
company in the State of New York.
The Company's principal business consists of underwriting annuities,
deposit-type contracts and life insurance sold through multiple distribution
channels. The Company conducts business only in the State of New York.
USE OF ESTIMATES
The nature of the insurance business requires management to make estimates
and assumptions that affect amounts reported in the statutory-basis
financial statements and accompanying notes. Actual results could differ
from these estimates.
BASIS OF PRESENTATION
The accompanying statutory-basis financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the
Department. "Prescribed" statutory accounting practices include state laws,
regulations and general administrative rules, as well as a variety of
publications of the National Association of Insurance Commissioners
("NAIC"). "Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state and may
change in the future.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification") effective January 1, 2001. Codification will likely change,
to some extent, prescribed statutory accounting practices and may result in
changes to the accounting practices that the Company uses to prepare its
statutory-basis financial statements. Codification will require adoption by
the various states before it becomes the prescribed statutory-basis of
accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for the Company, the
state of New York must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis
results to the Department. At this time, it is anticipated that New York
will adopt Codification, however, based on current guidance, management
believes that the impact of Codification will not be material to the
Company's statutory-basis financial statements.
Existing statutory accounting practices differ from accounting principles
generally accepted in the United States ("GAAP"). The more significant
variances from GAAP are as follows:
INVESTMENTS
Bonds are reported at cost or amortized cost or fair value based on their
NAIC rating. For GAAP, the Company's bonds are classified as
available-for-sale and, accordingly, are reported at fair value with changes
in the fair values reported directly in shareholder's equity after
adjustments for related amortization of deferred acquisition costs,
additional policyholder commitments and deferred income taxes.
Changes between cost and admitted asset investment amounts are credited or
charged directly to unassigned surplus rather than to a separate surplus
account.
Under a formula prescribed by the NAIC, the Company defers the portion of
realized capital gains and losses on sales of bonds and mortgage loans
attributable to changes in the general level of interest rates and amortizes
those deferrals over the remaining period to maturity of the individual
security sold. The net deferral is reported as the interest maintenance
reserve ("IMR") in the accompanying balance sheets. Realized capital gains
and losses are reported in income net of federal income tax and transfers to
IMR. The asset valuation reserve ("AVR") is determined by a NAIC prescribed
formula and is reported as a liability rather than a reduction to unassigned
surplus. Under GAAP, realized capital gains and losses
S-5
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
are reported in the income statement on a pretax basis in the period that
the asset giving rise to the gain or loss is sold and valuation allowances
are provided when there has been a decline in value deemed other than
temporary, in which case, the provision for such declines are charged to
income.
POLICY ACQUISITION COSTS
The costs of acquiring and renewing business are expensed when incurred.
Under GAAP, acquisition costs related to traditional life insurance, to the
extent recoverable from future policy revenues, are deferred and amortized
over the premium-paying period of the related policies using assumptions
consistent with those used in computing policy benefit reserves. For
universal life insurance, annuity and other investment-type products,
deferred policy acquisition costs, to the extent recoverable from future
gross profits, are amortized generally in proportion to the present value of
expected gross profits from surrender charges and investment, mortality, and
expense margins.
NONADMITTED ASSETS
Certain assets designated as "nonadmitted," principally furniture and
equipment, are excluded from the accompanying balance sheets and are charged
directly to unassigned surplus.
BENEFIT RESERVES
Certain policy reserves are calculated based on statutorily required
interest and mortality assumptions rather than on estimated expected
experience or actual account balances as would be required under GAAP.
PREMIUMS AND DEPOSITS
Premiums and deposits with respect to universal life policies and annuity
and other investment-type contracts consist of the entire premium received
and are reported as premium revenue. Under GAAP, premiums and deposits
received in excess of policy charges would not be recognized as premium
revenue.
BENEFITS AND SETTLEMENT EXPENSES
Death benefits paid, policy and contract withdrawals, and the change in
policy reserves on universal life policies, annuity and other
investment-type contracts are reported as benefits and settlement expenses
in the accompanying statements of operations. Under GAAP, withdrawals are
treated as a reduction of the policy or contract liabilities and benefits
would represent the excess of benefits paid over the policy account value
and interest credited to the account values. For traditional life and
disability income products, benefits and expenses are recognized when
incurred in a manner consistent with the related premium recognition
policies.
REINSURANCE
Commissions on business ceded are reported as income when received rather
than deferred and amortized with deferred policy acquisition costs as
required under GAAP. Business assumed under 100% indemnity and assumption
reinsurance agreements is accounted for as a purchase for GAAP reporting
purposes and the ceding commission represents the purchase price. Under
purchase accounting, assets acquired and liabilities assumed are reported at
fair value at the date of the transaction and the excess of the purchase
price over the sum of the amounts assigned to assets acquired less
liabilities assumed is recorded as goodwill. On a statutory-basis of
accounting, the ceding commission is expensed when paid.
Premiums, benefits and settlement expenses and policy benefits and contract
liabilities are reported in the accompanying financial statements net of
reinsurance amounts. Under GAAP, policy benefits and contract liabilities
are reported on a gross basis.
A liability for reinsurance balances has been provided for unsecured policy
and contract liabilities and unearned premiums ceded to reinsurers not
authorized by the Department to assume such business. Changes to those
amounts are credited or charged directly to unassigned surplus. Under GAAP,
an allowance for amounts deemed uncollectible is established through a
charge to income.
INCOME TAXES
Deferred federal income taxes are not provided for differences between
financial statement amounts and tax bases of assets and liabilities.
S-6
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
POLICYHOLDER DIVIDENDS
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
POSTRETIREMENT BENEFITS
For purposes of calculating the Company's postretirement benefit obligation,
only vested employees and current retirees are included in the actuarial
benefit valuation. Under GAAP, active employees not currently eligible would
also be included.
STATEMENTS OF CASH FLOWS
Cash and short-term investments in the statements of cash flows represent
cash balances and investments with initial maturities of one year or less
from the date of acquisition. Under GAAP, the corresponding captions of cash
and cash equivalents include cash balances and investments with initial
maturities of three months or less from the date of acquisition.
A reconciliation of the Company's capital and surplus and net income (loss)
determined on a statutory accounting basis with amounts determined in
accordance with GAAP is as follows:
<TABLE>
<CAPTION>
CAPITAL AND SURPLUS NET INCOME (LOSS)
----------------------------------------------------------------------------
DECEMBER 31 YEAR ENDED DECEMBER 31
1999 1998 1999 1998 1997
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(IN THOUSANDS)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts as reported on a
statutory -- basis
$132,394 $111,719 $ 19,901 $(254,211) $ 5,512
-----------------------------------
GAAP adjustments:
Net unrealized gain (loss) on
investments (74,971) 27,851 -- -- --
-----------------------------------
Interest maintenance reserve (792) 5,051 458 (579) (370)
-----------------------------------
Net realized gain (loss) on
investments (1,951) (990) (6,348) 3,050 (240)
-----------------------------------
Asset valuation reserve 7,885 5,375 -- -- --
-----------------------------------
Policy and contract reserves (72,302) (85,875) 25,985 271,293 (3,667)
-----------------------------------
Present value of future profits,
deferred policy acquisition
costs and goodwill 369,032 336,568 (6,639) 6,091 524
-----------------------------------
Policyholders' share of earnings
and surplus on participating
business (9,325) (9,904) 1,071 (100) --
-----------------------------------
Deferred income taxes 17,505 35,280 (12,159) (12,696) 671
-----------------------------------
Nonadmitted assets 1,685 880 -- -- --
-----------------------------------
Other, net 4,304 (1,705) (2,096) (82) --
----------------------------------- -------- -------- -------- --------- -------
Net increase (decrease) 241,070 312,531 272 266,977 (3,082)
----------------------------------- -------- -------- -------- --------- -------
Amounts on a GAAP -- basis $373,464 $424,250 $ 20,173 $ 12,766 $ 2,430
----------------------------------- ======== ======== ======== ========= =======
</TABLE>
S-7
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Other significant accounting practices are as follows:
INVESTMENTS
Bonds not backed by loans are principally stated at amortized cost and the
discount or premium is amortized using the interest method.
Mortgage-backed bonds are valued at amortized cost and income is recognized
using a constant effective yield based on anticipated prepayments and the
estimated economic life of the securities. When actual prepayments differ
significantly from anticipated prepayments, the effective yield is
recalculated to reflect actual payments to date and anticipated future
payments. The net investment in the securities is adjusted to the amount
that would have existed had the new effective yield been applied since the
acquisition of the securities.
Short-term investments include investments with maturities of less than one
year at the date of acquisition.
Policy loans are reported at unpaid principal balances.
Mortgage loans on real estate are reported at unpaid principal balances,
less allowances for impairments.
Realized investment gains and losses on investments sold are determined
using the specific identification method. Changes in admitted asset carrying
amounts of bonds, mortgage loans, and common stocks are credited or charged
directly in unassigned surplus.
PREMIUMS
Premiums for group tax-qualified annuity business are recognized as revenue
when deposited. Life insurance and individual annuity premiums are
recognized as revenue when due. Accident and health premiums are earned pro
rata over the contract term of the policies.
BENEFIT RESERVES
Life, annuity and accident and health disability benefit reserves are
developed by actuarial methods and are determined based on published tables
using statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
Department. The Company waives deduction of deferred fractional premiums on
the death of life and annuity policy insureds and returns any premium beyond
the date of death, except for policies issued prior to March 1977. Surrender
values on policies do exceed the corresponding benefit reserves. Additional
reserves are established when the results of cash flow testing under various
interest rate scenarios indicate the need for such reserves. If net premiums
exceed the gross premiums on any insurance inforce, additional reserves are
established. Benefit reserves for policies underwritten on a substandard
basis are determined using the multiple table reserve method.
The tabular interest, tabular less actual reserves released and the tabular
cost have been determined by formula or from the basic data for such items.
Tabular interest funds not involving life contingencies were determined
using the actual interest credited to the funds plus the change in accrued
interest.
Liabilities related to policyholders' funds left on deposit with the Company
generally are equal to fund balances less applicable surrender charges.
CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Unpaid claims and claim adjustment expenses on accident and health policies
represent the estimated ultimate net cost of all reported and unreported
claims incurred through December 31. The Company does not discount claims
and claim adjustment expense reserves. The reserves for unpaid claims and
claim adjustment expenses are estimated using individual case-basis
valuations and statistical analyses. Those estimates are subject to the
effects of trends in claim severity and frequency. Although considerable
variability is inherent in such estimates, management believes that reserves
for unpaid claims and claim adjustment
S-8
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
expenses are adequate. The estimates are continually reviewed and adjusted
as necessary as experience develops or new information becomes known; such
adjustments are included in current operations.
REINSURANCE CEDED AND ASSUMED
Reinsurance premiums, benefits and settlement expenses are accounted for on
bases consistent with those used in accounting for the original policies
issued and the terms of the reinsurance contracts.
PENSION BENEFITS
Costs associated with the Company's defined benefit pension plans are
systematically accrued during the expected period of active service of the
covered employees.
ASSETS HELD IN SEPARATE ACCOUNTS AND LIABILITIES RELATED TO SEPARATE
ACCOUNTS
Separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for the exclusive
benefit of variable annuity and universal life contractholders and for which
the contractholders, and not the Company, bears the investment risk.
Separate account contractholders have no claim against the assets of the
general account of the Company. Separate account assets are reported at fair
value and consist of unit investments in mutual funds. The detailed
operations of the separate accounts are not included in the accompanying
statutory-basis financial statements. The fees received by the Company for
administrative and contractholder maintenance services performed for these
separate accounts are included in the Company's statements of operations.
2. INVESTMENTS
The cost or amortized cost, gross unrealized gains and
losses and the fair value of investments in bonds are
summarized as follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1999:
Corporate $1,214,312,519 $ 908,731 $(65,599,479) $1,149,621,771
--------------------------------
U.S. government 25,736,299 11,711 (1,900,750) 23,847,260
--------------------------------
Foreign government 17,602,777 362,624 (1,070,496) 16,894,905
--------------------------------
Mortgage-backed 221,570,519 2,732 (9,530,799) 212,042,452
--------------------------------
State and municipal 3,370,717 -- (105,915) 3,264,802
-------------------------------- -------------- ----------- ------------ --------------
$1,482,592,831 $ 1,285,798 $(78,207,439) $1,405,671,190
============== =========== ============ ==============
At December 31, 1998:
Corporate $1,148,083,966 $27,649,036 $ (7,489,560) $1,168,243,442
--------------------------------
U.S. government 39,617,653 564,146 (119,394) 40,062,405
--------------------------------
Foreign government 19,532,744 994,331 (720,250) 19,806,825
--------------------------------
Mortgage-backed 225,005,162 6,239,684 (421,281) 230,823,565
--------------------------------
State and municipal 3,642,494 164,552 -- 3,807,046
-------------------------------- -------------- ----------- ------------ --------------
$1,435,882,019 $35,611,749 $ (8,750,485) $1,462,743,283
============== =========== ============ ==============
</TABLE>
S-9
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The carrying amount of investments in bonds in the balance
sheet at December 31, 1999 and 1998 reflects adjustments of
$1,123,693 and $178,648, respectively, to decrease amortized
cost as a result of the Securities Valuation Office of the
NAIC designating certain investments as low or lower
quality.
A summary of the cost or amortized cost and fair value of
investments in bonds at December 31, 1999, by contractual
maturity, is as follows:
<TABLE>
<CAPTION>
COST OR
AMORTIZED FAIR
COST VALUE
-----------------------------------
<S> <C> <C>
Maturity:
In 2000 $ 64,699,324 $ 64,449,287
------------------------------------------------------------
In 2001-2004 360,685,026 351,609,953
------------------------------------------------------------
In 2005-2009 490,969,108 462,139,167
------------------------------------------------------------
After 2009 344,668,854 315,430,331
------------------------------------------------------------
Mortgage-backed securities 221,570,519 212,042,452
------------------------------------------------------------ -------------- --------------
Total $1,482,592,831 $1,405,671,190
------------------------------------------------------------ ============== ==============
</TABLE>
The expected maturities may differ from the contractual
maturities in the foregoing table because certain borrowers
may have the right to call or prepay obligations with or
without call or prepayment penalties.
Proceeds from sales of investments in bonds were $253,876,450, $203,748,028
and $274,742,319 in 1999, 1998 and 1997, respectively. Gross gains of
$842,229, $3,612,434 and $1,533,793, and gross losses of $6,968,975,
$1,529,149 and $1,922,165 during 1999, 1998 and 1997, respectively, were
realized on those sales. Net gains (losses) of ($186), $17,705 and ($26)
were realized on sales of short-term investments in 1999, 1998 and 1997,
respectively.
At December 31, 1999 and 1998, investments in bonds with an admitted asset
value of $500,078 and $500,129, respectively, were on deposit with the
Department to satisfy regulatory requirements.
During 1999, the minimum and maximum lending rates for mortgage loans were
6.62% and 10.29%, respectively. At the issuance of a loan, the percentage of
loan to value on any one loan does not exceed 75%. At December 31, 1999, the
Company did not hold any mortgages with interest overdue beyond one year.
All properties covered by mortgage loans have fire insurance at least equal
to the excess of the loan over the maximum loan that would be allowed on the
land without the building.
S-10
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The major categories of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Income:
Bonds $106,590,150 $ 78,205,686 $42,237,959
--------------------------------------------------
Mortgage loans on real estate 13,522,104 14,304,385 --
--------------------------------------------------
Policy loans 11,018,423 7,981,377 1,990,613
--------------------------------------------------
Cash and short-term investments 2,391,977 5,893,453 315,328
-------------------------------------------------- ------------ ------------ -----------
Total investment income 133,522,654 106,384,901 44,543,900
----------------------------------------------------
Investment expenses 1,309,426 1,301,322 590,104
---------------------------------------------------- ------------ ------------ -----------
Net investment income $132,213,228 $105,083,579 $43,953,796
---------------------------------------------------- ============ ============ ===========
</TABLE>
Realized capital gains and losses are reported net of federal income taxes
of $437,941, $1,223,897 and $55,541 in 1999, 1998 and 1997, respectively,
and amounts transferred to the interest maintenance reserve of $3,169,187,
$3,035,887 and $239,459 in 1999, 1998 and 1997, respectively.
At December 31, 1999, the Company did not have a material concentration of
financial instruments in a single investee, industry or geographic location.
3. FEDERAL INCOME TAXES
The Company's federal income tax return is not consolidated with any other
entities. The effective federal income tax rate for financial reporting
purposes differs from the prevailing statutory tax rate principally due to
tax-exempt investment income, other pass through tax attributes from
investments, differences in ceding commissions, policy acquisition costs,
and policy and contract liabilities in the tax return versus the financial
statements.
In 1998, a federal income tax net operating loss of $80,156,000 was
incurred. The Company utilized $9,162,000 of the net operating loss to
recover taxes paid in prior years. In 1999, an additional $10,170,000 of net
operating loss was utilized to offset taxable income. The remaining portion
of the net operating loss at December 31, 1999 of $60,824,000 will be
available for use to offset taxable income in future years. The net
operating loss carryforward of $60,824,000 will expire in 2013.
The Company paid $3,675,000 in 1997 for federal income taxes. No federal
income tax payments were made in 1999 or 1998. The Company received a refund
of $3,196,000 in 1999 as a result of the utilization of the net operating
loss.
4. REINSURANCE
The Company cedes insurance to other companies, including affiliated
companies. The portion of risks exceeding the Company's retention limits is
reinsured with Lincoln Life. The Company limits its maximum risk that it
retains on an individual to $500,000. The Company remains obligated for
amounts ceded in the event that the reinsurers do not meet their
obligations. The Company did not cede or assume any business prior to
January 1, 1998.
On January 2, 1998, the Company and Lincoln Life entered into an indemnity
reinsurance transaction whereby the Company and Lincoln Life reinsured 100%
of a block of individual life insurance and annuity business of CIGNA
Corporation ("CIGNA"). The Company paid $149,621,452 to CIGNA on January 2,
1998 under the terms of the reinsurance agreement and recognized a ceding
commission expense of $149,714,239 in 1998, which is included in the
statements of operations line item "Commissions." At the time of closing,
this block of business had statutory liabilities of $779,551,235 which
became the Company's obligations. The Company also received assets, measured
on a historical statutory-basis, equal to the liabilities. Subsequent to the
CIGNA transaction, the
S-11
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
4. REINSURANCE (CONTINUED)
Company and Lincoln Life announced that they had reached an agreement to
sell the administration rights to a variable annuity portfolio that had been
acquired as part of the block of business assumed on January 2, 1998. This
sale closed on October 12, 1998 with an effective date of September 1, 1998.
During 1999, the Company received $5,800,000 from CIGNA as a result of the
final settlement of the statutory-basis values of assets and liabilities for
the reinsured business. The $5,800,000 is included in the statements of
operations line item "Other revenues." Additionally, on November 1, 1999,
the Company and Lincoln Life closed the previously announced agreement to
retrocede virtually 100% of the disability income business assumed from
CIGNA. This retrocession agreement was effective November 1, 1999. A gain on
the transaction of $4.6 million was recorded directly in unassigned surplus,
net of tax.
On October 1, 1998, the Company entered into an indemnity reinsurance
transaction whereby the Company and Lincoln Life reinsured 100% of a block
of individual life insurance business from Aetna, Inc. The Company paid
$143,721,000 to Aetna on October 1, 1998 under the terms of the reinsurance
agreement and recognized a ceding commission expense of $135,374,141 in
1998, which is included in the statements of operations line item
"Commissions." At the time of closing, this block of business had statutory
liabilities of $463,007,132 which became the Company's obligation. The
Company also received assets, measured on a historical statutory-basis,
equal to the liabilities.
Subsequent to the Aetna transaction, the Company and Lincoln Life announced
that they had reached an agreement to retrocede the sponsored life business
assumed for $87,600,000, of which $11,900,000 was received by the Company.
The retrocession agreement was executed on October 14, 1998 with an
effective date of October 1, 1998.
The balance sheet caption, "Future policy benefits and claims" has been
reduced for insurance ceded by $97,457,160 and $54,411,763 at December 31,
1999 and 1998, respectively. The balance sheet caption, "Other policyholder
funds" has been reduced for insurance ceded by $2,290,826 and $2,722,404 at
December 31, 1999 and 1998, respectively.
The caption "Premiums and deposits" in the statements of operations includes
$140,394,771 and $1,276,884,778 of insurance assumed and $44,245,573 and
$52,443,264 of insurance ceded in 1999 and 1998, respectively.
The caption "Benefits and settlement expenses" in the statements of
operations is net of reinsurance recoveries of $71,763,962 and $47,526,681
for 1999 and 1998, respectively.
The regulatory required liability for unsecured reserves ceded to
unauthorized reinsurers was $1,287,400 and $682,060 at December 31, 1999 and
1998, respectively. Amounts payable or recoverable for reinsurance on policy
and contract liabilities are not subject to periodic or maximum limits. At
December 31, 1999, the Company's reinsurance recoverables are not material
and no individual reinsurer owed the Company an amount that was equal to or
greater than 3% of the Company's surplus.
5. LIFE AND ANNUITY RESERVES AND DEPOSIT FUND LIABILITIES
At December 31, 1999 and 1998, the Company had $1,149,964,000 and
$1,092,754,000, respectively, of insurance in force for which the gross
premiums are less than the net premiums according to the standard of
valuation set by the State of New York. Reserves to cover the above
insurance totaled $5,893,549 and $6,937,379 at December 31, 1999 and 1998,
respectively.
At December 31, 1999, the Company's annuity reserves and deposit fund
liabilities, including separate accounts, that are subject to discretionary
withdrawal with adjustment, subject to discretionary withdrawal without
adjustment and not subject to discretionary withdrawal provisions are
summarized as follows:
S-12
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
5. LIFE AND ANNUITY RESERVES AND DEPOSIT FUND LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
AMOUNT PERCENT
-------------- -------
<S> <C> <C>
Subject to discretionary withdrawal with adjustment:
With market value adjustment $ 338,886,028 26.5%
------------------------------------------------------------
At book value, less surrender charge 123,141,771 9.6
------------------------------------------------------------
At market value 319,140,374 24.9
------------------------------------------------------------
Subject to discretionary withdrawal without adjustment:
At book value with minimal or no charge or adjustment 487,578,243 38.1
------------------------------------------------------------
Not subject to discretionary withdrawal 10,884,302 .9
------------------------------------------------------------ -------------- ------
Total annuity reserves and deposit fund liabilities, before
reinsurance 1,279,630,718 100.0%
======
Less reinsurance 2,560,424
------------------------------------------------------------ --------------
Net annuity reserves and deposit fund liabilities, including
separate accounts $1,277,070,294
------------------------------------------------------------ ==============
</TABLE>
A reconciliation of the total net annuity reserves and deposit fund
liabilities to the amounts reported in the Company's 1999 Annual Statement
and the Company's Separate Accounts Annual Statement at December 31, 1999 is
as follows:
<TABLE>
<S> <C>
Per 1999 Annual Statement:
Exhibit 8, Section B -- Total (net) $ 10,029,253
------------------------------------------------------------
Exhibit 8, Section C -- Total (net) 1,122,910
------------------------------------------------------------
Exhibit 10, Column 1, Line 19 946,777,757
------------------------------------------------------------ --------------
957,929,920
------------------------------------------------------------
Per Separate Account Annual Statement:
------------------------------------------------------------
Exhibit 6, Column 2, Line 0299999 Page 3, Line 3 319,140,374
------------------------------------------------------------ --------------
319,140,374
--------------
Total net annuity reserves and deposit fund liabilities $1,277,070,294
------------------------------------------------------------ ==============
</TABLE>
Details underlying the balance sheet caption "Other policyholder funds" are
as follows:
<TABLE>
<S> <C> <C>
DECEMBER 31
1999 1998
------------ ------------
Premium deposit funds $920,665,883 $931,230,214
------------------------------------------------------------
Undistributed earnings on participating business 30,544,045 30,772,519
------------------------------------------------------------
Other 138,036 722,578
------------------------------------------------------------ ------------ ------------
$951,347,964 $962,725,311
============ ============
</TABLE>
6. CAPITAL AND SURPLUS
The Company received additional paid-in surplus from Lincoln Life of
$158,407,481 and $156,721,000 in December 1997 and October 1998,
respectively.
Life insurance companies are subject to certain Risk-Based Capital ("RBC")
requirements as specified by the NAIC. Under those requirements, the amount
of capital and surplus maintained by a life insurance company is to be
determined based on the various risk factors related to it. At December 31,
1999, the Company exceeds the RBC requirements.
S-13
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
6. CAPITAL AND SURPLUS (CONTINUED)
The payment of dividends by the Company requires 30 day advance notice to
the Department.
7. EMPLOYEE BENEFIT PLANS
LNC maintains defined benefit pension plans for its employees (including
Company employees) and a defined contribution plan for the Company's agents.
LNC also maintains 401(k) plans, deferred compensation plans and
postretirement medical and life insurance plans for its employees and agents
(including the Company's employees and agents). The aggregate expenses and
accumulated obligations for the Company's portion of these plans are not
material to the Company's statutory-basis statements of operations or
balance sheets for any of the periods shown.
LNC has various incentive plans for key employees, agents and directors of
LNC and its subsidiaries that provide for the issuance of stock options,
stock appreciation rights, restricted stock awards and stock incentive
awards. These plans are comprised primarily of stock option incentive plans.
Stock options granted under the stock option incentive plans are at the
market value at the date of grants and, subject to termination of
employment, expire ten years from the date of grant.
Such options are transferable only upon death and are exercisable one year
from the date of grant for options issued prior to 1992. Options issued
subsequent to 1991 are exercisable in equal increments on the option
issuance anniversary in three to four years following issuance.
As of December 31, 1999, 27,534 shares of LNC common stock were subject to
options granted to Company employees under the stock option incentive plans
of which 8,934 were exercisable on that date. The exercise prices of the
outstanding options range from $21.32 to $50.83. During 1999 and 1998, 3,740
and 137 options, respectively, were exercised. During 1999, 2,400 options
were forfeited.
8. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES
VULNERABILITY FROM CONCENTRATIONS
At December 31, 1999, the Company did not have a concentration of:
1) business transactions with a particular customer, lender or distributor;
2) revenues from a particular product or service; 3) sources of supply of
labor or services used in the business; or 4) a market or geographic area in
which business is conducted that makes it vulnerable to an event that is at
least reasonably possible to occur in the near term and which could cause a
severe impact to the Company's financial condition.
CONTINGENCY MATTERS
The Company is occasionally involved in various pending or threatened legal
proceedings arising from the conduct of business. These proceedings are
routine in the ordinary course of business. In some instances, these
proceedings include claims for compensatory and punitive damages and similar
types of relief in addition to amounts for alleged contractual liability or
requests for equitable relief. After consultation with legal counsel and a
review of available facts, it is management's opinion that the ultimate
liability, if any, under these proceedings will not have a material adverse
effect on the financial position of the Company.
The number of insurance companies that are under regulatory supervision has
resulted, and is expected to continue to result, in assessments by state
guaranty funds to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments may be partially recovered
through a reduction in future premium taxes in some states. The Company has
accrued for expected assessments net of estimated future premium tax
deductions.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discussion outlines the methodologies and assumptions used to
determine the estimated fair values of the Company's financial instruments.
Considerable judgment is required to develop these fair values. Accordingly,
the estimates shown are not necessarily indicative of the
S-14
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
amounts that would be realized in a one-time, current market exchange of the
Company's financial instruments.
BONDS AND COMMON STOCK
Fair values of bonds are based on quoted market prices, where available. For
bonds not actively traded, fair values are estimated using values obtained
from independent pricing services. In the case of private placements, fair
values are estimated by discounting expected future cash flows using a
current market rate applicable to the coupon rate, credit quality and
maturity of the investments. The fair values of common stocks are based on
quoted market prices.
MORTGAGE LOANS ON REAL ESTATE
The estimated fair values of mortgage loans on real estate are established
using a discounted cash flow method based on credit rating, maturity and
future income. The rating for mortgages in good standing are based on
property type, location, market conditions, occupancy, debt service
coverage, loan to value, caliber of tenancy, borrower and payment record.
Fair values for impaired mortgage loans are based on: 1) the present value
of expected future cash flows discounted at the loan's effective interest
rate; 2) the loan's market prices; or 3) the fair value of the collateral if
the loan is collateral dependent.
POLICY LOANS
The estimated fair value of investments in policy loans was calculated on a
composite discounted cash flow basis using U.S. Treasury interest rates
consistent with the maturity durations assumed. These durations were based
on historical experience.
CASH AND SHORT-TERM INVESTMENTS
The carrying value of cash and short-term investments approximates their
fair value.
INVESTMENT-TYPE INSURANCE CONTRACTS
The balance sheet captions, "Future policy benefits and claims" and "Other
policyholder funds," include investment type insurance contracts (i.e.,
deposit contracts). The fair values for the deposit contracts are based on
their approximate surrender values.
The remainder of the balance sheet captions "Future policy benefits and
claims" and "Other policyholder funds," that do not fit the definition of
"investment-type insurance contracts" are considered insurance contracts.
Fair value disclosures are not required for these insurance contracts and
have not been determined by the Company. It is the Company's position that
the disclosure of the fair value of these insurance contracts is important
because readers of these financial statements could draw inappropriate
conclusions about the Company's capital and surplus determined on a fair
value basis. It could be misleading if only the fair value of assets and
liabilities defined as financial instruments are disclosed. The Company and
other companies in the insurance industry are monitoring the related actions
of the various rule-making bodies and attempting to determine an appropriate
methodology for estimating and disclosing the "fair value" of their
insurance contract liabilities.
SEPARATE ACCOUNTS
Assets held in separate accounts are reported in the accompanying
statutory-basis balance sheets at fair value. The related liabilities are
also reported at fair value in amounts equal to the separate account assets.
S-15
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
<S> <C> <C> <C> <C>
-------------------------------------------------------------
<CAPTION>
DECEMBER 31
1999 1998
---------------------------------------------------------------
(IN THOUSANDS)
---------------------------------------------------------------
ASSETS (LIABILITIES)
<S> <C> <C> <C> <C>
-----------------------------------------------
Bonds $1,482,593 $1,405,671 $1,435,882 $1,462,743
-----------------------------------------------
Unaffiliated common stocks 161 161 155 155
-----------------------------------------------
Mortgage loans on real estate 197,425 189,179 184,504 185,694
-----------------------------------------------
Policy loans 177,437 190,667 170,373 183,408
-----------------------------------------------
Cash and short-term investments 29,467 29,467 143,547 143,547
-----------------------------------------------
Other invested assets 223 223 60 60
-----------------------------------------------
Investment-type insurance contracts (951,348) (910,752) (962,725) (938,191)
-----------------------------------------------
Separate account assets 328,768 328,768 236,862 236,862
-----------------------------------------------
Separate account liabilities (328,768) (328,768) (236,862) (236,862)
-----------------------------------------------
</TABLE>
10. TRANSACTIONS WITH AFFILIATES
The Company has entered into agreements with Lincoln Life to receive
processing and other corporate services. Fees paid to Lincoln Life for such
services were $22,675,891, $18,504,450 and $3,454,014 in 1999, 1998 and
1997, respectively. The Company has also entered into an agreement with
Lincoln Life to provide certain processing services. Fees received from
Lincoln Life for such services were $1,359,279, $273,952 and $578,003 in
1999, 1998 and 1997, respectively.
The Company has an investment management agreement with an affiliate,
Lincoln Investment Management, Inc., for investment advisory and asset
management services. Fees paid for such investment services were $1,309,426,
$1,501,592 and $558,011 in 1999, 1998 and 1997, respectively.
The Company cedes business to two affiliated companies, Lincoln Life and
Lincoln National Reassurance Company. The caption "Premiums and deposits" in
the accompanying statements of operations has been reduced by $6,269,272 and
$2,095,019 for premiums paid on these contracts in 1999 and 1998,
respectively. The caption "Future policy benefits and claims" has been
reduced by $2,323,435 and $2,583,702 related to reserve credits taken on
these contracts as of December 31, 1999 and 1998, respectively.
11. SEPARATE ACCOUNTS
Separate account premiums, deposits and other considerations amounted to
$109,574,216 and $73,993,993 in 1999 and 1998, respectively. Reserves for
separate accounts with assets at fair value were $320,413,080 and
$229,940,273 at December 31, 1999 and 1998, respectively. All reserves are
subject to discretionary withdrawal at market value. All of the Company's
separate accounts are nonguaranteed. The investment risks associated with
market value changes are borne entirely by the contractholder.
S-16
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
11. SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of transfers to (from) separate accounts is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998
-------------------------------
<S> <C> <C>
Transfers as reported in the Summary of Operations of
various Separate Accounts:
Transfers to separate accounts $109,574,216 $ 73,993,993
------------------------------------------------------------ ------------ ------------
Transfers from separate accounts (81,318,409) (40,118,042)
------------------------------------------------------------ ------------ ------------
Net transfer to separate accounts as reported in the
Company's NAIC Annual Statement -- Summary of Operations $ 28,255,807 $ 33,875,951
------------------------------------------------------------ ============ ============
</TABLE>
12. CENTURY COMPLIANCE (UNAUDITED)
The Year 2000 issue was complex and affected many aspects of the Company's
business. The Company was particularly concerned with Year 2000 issues that
related to the Company's computer systems and interfaces with the computer
systems of vendors, suppliers, customers and business partners. From 1996
through 1999 the Company redirected a large portion of internal Information
Technology ("IT") efforts and contracted with outside consultants to update
systems to address Year 2000 issues. Experts were engaged to assist in
developing work plans and cost estimates and to complete remediation
activities.
For the year ended December 31, 1999, the Company identified expenditures of
$124,000 to address this issue. This brings the expenditures for 1996
through 1999 to $208,000. Because updating systems and procedures is an
integral part of the Company's on-going operations, most of the expenditures
shown above are expected to continue after all Year 2000 issues have been
resolved. All Year 2000 expenditures have been funded from operating cash
flows.
The scope of the overall Year 2000 program included the following four major
project areas: 1) addressing the readiness of business applications,
operating systems and hardware on mainframe, personal computer and local
area network platforms (IT); 2) addressing the readiness of non-IT embedded
software and equipment (non-IT); 3) addressing the readiness of key business
partners and 4) establishing Year 2000 contingency plans. The Company
completed these projects prior to year-end.
The Company's businesses have not identified any major problems in their
business processing. Minor problems have been resolved quickly. The
Company's businesses have not experienced any significant interruption in
service to clients or business partners or in reporting to regulators.
S-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Lincoln Life & Annuity Company of New York
We have audited the accompanying statutory-basis balance sheets of
Lincoln Life & Annuity Company of New York (a wholly owned subsidiary
of The Lincoln National Life Insurance Company) as of December 31,
1999 and 1998, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for each
of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company
presents its financial statements in conformity with accounting
practices prescribed or permitted by the New York Insurance
Department, which practices differ from accounting principles
generally accepted in the United States. The variances between such
practices and accounting principles generally accepted in the United
States and the effects on the accompanying financial statements are
described in Note 1.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do
not present fairly, in conformity with accounting principles
generally accepted in the Untied States, the financial position of
Lincoln Life & Annuity Company of New York at December 31, 1999 and
1998, or the results of its operations or its cash flows for each of
the three years in the period ended December 31, 1999.
However, in our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Lincoln Life & Annuity Company of New York at December 31, 1999 and
1998, the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999, in conformity
with accounting practices prescribed or permitted by the New York
Insurance Department.
/s/ Ernst & Young LLP
Fort Wayne, Indiana
March 10, 2000
S-18
<PAGE>
PART II
FEES AND CHARGES REPRESENTATION
Lincoln Life & Annuity Company of New York represents that the fees and
charges deducted under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by Lincoln Life & Annuity Company of New York.
UNDERTAKING
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
INDEMNIFICATION
(a) Brief description of indemnification provisions.
In general, Article VII of the By-Laws of Lincoln Life & Annuity
Company of New York (LLANY) provides that LLANY will indemnify
certain persons against expenses, judgments and certain other
specified costs incurred by any such person if he/she is made a party
or is threatened to be made a party to a suit or proceeding because
he/she was a director, officer, or employee of LLANY, as long as
he/she acted in good faith and in a manner he/she reasonably believed
to be in the best interests of, or not opposed to the best interests
of, LLANY. Certain additional conditions apply to indemnification in
criminal proceedings.
In particular, separate conditions govern indemnification of
directors, officers, and employees of LLANY in connection with suits
by, or in the right of, LLANY.
Please refer to Article VII of the By-Laws of LLANY (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements
of, New York law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities
Act of 1933.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 28(a) above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of
any such action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This Pre-Effective Amendment No. 1 to the Initial Registration Statement
comprises the following papers and documents:
The facing sheet;
A cross-reference sheet (reconciliation and tie);
The prospectus consisting of 44 pages;
The undertaking to file reports;
The fees and charges representation;
Statements regarding indemnification;
The signatures.
<PAGE>
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of Lincoln Life & Annuity
Company of New York and related documents authorizing establishment
of the Account.(2)
(2) Not applicable.
(3) (a) Principal Underwriting Agreement between Lincoln Financial
Advisors Corporation and Lincoln Life & Annuity Company of New
York.(3)
(b) Form of Selling Group Agreement.*
(c) Commission Schedule for Variable Life Policies.*
(4) Not applicable.
(5) (a) Form of Policy and Application.(2)
(b) Riders.(2)
(c) Form of Contract LN655NY, form of application B10409NY.(6)
(6) (a) Articles of Incorporation of Lincoln Life & Annuity Company of
New York.(1)
(b) Bylaws of Lincoln Life & Annuity Company of New York.(1)
(7) Not applicable.
(8) Fund Participation Agreements.
Agreements between Lincoln Life & Annuity Company of New York and:
(a) AIM Variable Insurance Funds, Inc.(3)
(b) American Variable Insurance Series.(7)
(c) Baron Capital Funds Trust.(5)
(d) BT Insurance Funds Trust.(3)
(e) Delaware Group Premium Fund, Inc.(7)
(f) Fidelity Variable Insurance Products Fund.(3)
(g) Fidelity Variable Insurance Products Fund II.(3)
(h) Fidelity Variable Insurance Products Fund III.(5)
(i) Janus Aspen Series.(5)
(j) Lincoln National Funds.(3)
(k) MFS-Registered Trademark- Variable Insurance Trust.(3)
(l) Neuberger & Berman Advisors Management Trust.(5)
(m) Templeton Variable Products Series Fund.(3)
(n) OCC Accumulation Trust.(3)
(9) (a) Not applicable.
(b) *
(10) See Exhibit 1(5).
2. See Exhibit 1(5).
3. Opinion and Consent of Counsel
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Actuary
7. Consent of Independent Auditors
8. Not applicable.
* To be filed by amendment
(1) Incorporated by reference to Registration Statement on Form N-4 (File
No. 333-38007 filed on October 16, 1997.
(2) Incorporated by reference to Registration Statement on Form N-8B-2 (File
No. 811-08651) filed on February 11, 1998.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-6
(File No. 333-42507) filed on February 26, 1999.
(4) Incorporated by reference to Registration Statement on Form N-4 (File
No. 33-25990) filed on April 22, 1998.
(5) Incorporated by reference to Post-Effective Amendment No. 5 on Form N-4
(File No. 333-10863) filed on April 29, 1999.
(6) Incorporated by reference to Registration Statement on Form S-6 (File
No. 333-33778) filed on March 31, 2000.
(7) Incorporated by reference to Post-Effective Amendment No. 5 to the
Registration Statement (File No. 333-42507) filed on April 25, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
LLANY Separate Account R for Flexible Premium Variable Life Insurance, has duly
caused this Pre-Effective Amendment No. 1 to the Initial Registration Statement
(No. 333-33778) on Form S-6 to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Syracuse and the State of New York, on
the 12th day of May, 2000.
<TABLE>
<S> <C> <C>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
(Registrant)
By: /s/ JOANNE B. COLLINS
------------------------------------------
Joanne B. Collins
PRESIDENT, TREASURER AND
DIRECTOR OF LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(Depositor)
By: /s/ JOANNE B. COLLINS
------------------------------------------
Joanne B. Collins
PRESIDENT, TREASURER AND DIRECTOR
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Pre-Effective Amendment No. 1 to the Initial Registration Statement
(No. 333-33778) has been signed below on May 12, 2000 by the following persons,
as officers and directors of the Depositor, in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ JOANNE B. COLLINS President, Treasurer and
------------------------------------------- Director (Principal
Joanne B. Collins Executive Officer)
Second Vice President and
/s/ TROY D. PANNING* Chief Financial Officer
------------------------------------------- (Principal Financial
Troy D. Panning Officer and Principal
Accounting Officer)
/s/ JON A. BOSCIA*
------------------------------------------- Director
Jon A. Boscia
/s/ RICHARD C. VAUGHAN*
------------------------------------------- Director
Richard C. Vaughan
/S/ THOMAS D. BELL, JR.*
------------------------------------------- Director
Thomas D. Bell, Jr.
/S/ ROLAND C. BAKER*
------------------------------------------- Director
Roland C. Baker
/s/ JOHN H. GOTTA*
------------------------------------------- Director
John H. Gotta
/s/ BARBARA STEURY KOWALCZYK*
------------------------------------------- Director
Barbara Steury Kowalczyk
/s/ MARGUERITE LEANNE LACHMAN*
------------------------------------------- Director
Marguerite Leanne Lachman
/s/ JOHN M. PIETRUSKI*
------------------------------------------- Director
John M. Pietruski
/s/ LAWRENCE T. ROWLAND*
------------------------------------------- Director
Lawrence T. Rowland
/s/ J. PATRICK BARRETT*
------------------------------------------- Director
J. Patrick Barrett
/s/ LOUIS G. MARCOCCIA*
------------------------------------------- Director
Louis G. Marcoccia
</TABLE>
*by /s/ JOANNE B. COLLINS
--------------------------------------
Joanne B. Collins, pursuant to a Power
of Attorney filed with this
Pre-Effective Amendment No. 1 to the
Initial Registration Statement
(No. 333-33778).
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Lincoln Life & Annuity
Company of New York, hereby severally constitute and appoint, Joanna B. Collins,
Robert O. Sheppard and Troy D. Panning, individually, our true and lawful
attorneys-in-fact, with full power to each of them to sign for us, in our names
and in the capacities indicated below, any and all Registration Statements on
Form S-6, Form N-8B-2 and/or Form N-6, or any successors to these Forms, and
amendments thereto, filed with the Securities and Exchange Commission under the
Securities Act of 1933, on behalf of the Company in its own name or in the name
of one of its Separate Accounts, hereby ratifying and confirming our signatures
as they may be signed by any of our attorneys-in-fact to any such Registration
Statement or amendment to said Registration Statement. The execution of this
document by each of the undersigned hereby revokes any and all Powers of
Attorney previously executed by said individual for this specific purpose.
WITNESS our hands and common seal on this 7th day of February, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ JOANNE B. COLLINS* President, Treasurer and
------------------------------------------- Director (Principal
Joanne B. Collins Executive Officer)
Second Vice President and
/s/ TROY D. PANNING* Chief Financial Officer
------------------------------------------- (Principal Financial
Troy D. Panning Officer and Principal
Accounting Officer)
/s/ JON A. BOSCIA*
------------------------------------------- Director
Jon A. Boscia
/s/ RICHARD C. VAUGHAN*
------------------------------------------- Director
Richard C. Vaughan
/S/ THOMAS D. BELL, JR.*
------------------------------------------- Director
Thomas D. Bell, Jr.
------------------------------------------- Director
Roland C. Baker
/s/ JOHN H. GOTTA*
------------------------------------------- Director
John H. Gotta
/s/ BARBARA STEURY KOWALCZYK*
------------------------------------------- Director
Barbara Steury Kowalczyk
/s/ MARGUERITE LEANNE LACHMAN*
------------------------------------------- Director
Marguerite Leanne Lachman
/s/ JOHN M. PIETRUSKI*
------------------------------------------- Director
John M. Pietruski
-------------------------------------------
Lawrence T. Rowland Director
/s/ J. PATRICK BARRETT*
------------------------------------------- Director
J. Patrick Barrett
/s/ LOUIS G. MARCOCCIA*
------------------------------------------- Director
Louis G. Marcoccia
</TABLE>
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Lincoln Life & Annuity
Company of New York, hereby severally constitute and appoint, Joanna B. Collins,
Robert O. Sheppard and Troy D. Panning, individually, our true and lawful
attorneys-in-fact, with full power to each of them to sign for us, in our names
and in the capacities indicated below, any and all Registration Statements on
Form S-6, Form N-8B-2 and/or Form N-6, or any successors to these Forms, and
amendments thereto, filed with the Securities and Exchange Commission under the
Securities Act of 1933, on behalf of the Company in its own name or in the name
of one of its Separate Accounts, hereby ratifying and confirming our signatures
as they may be signed by any of our attorneys-in-fact to any such Registration
Statement or amendment to said Registration Statement. The execution of this
document by each of the undersigned hereby revokes any and all Powers of
Attorney previously executed by said individual for this specific purpose.
WITNESS our hands and common seal on this 4th day of February, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ LAWRENCE T. ROWLAND
---------------------------------------- Director
Lawrence T. Rowland
Subscribed and sworn to before me this
STATE OF INDIANA 4th day of February, 2000
COUNTY OF ALLEN SS:
/s/ JANET L. LINDENBERG
--------------------------------------
Notary Public
Commission Expires: 7-10-2001
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Lincoln Life & Annuity
Company of New York, hereby severally constitute and appoint, Joanna B. Collins,
Robert O. Sheppard and Troy D. Panning, individually, our true and lawful
attorneys-in-fact, with full power to each of them to sign for us, in our names
and in the capacities indicated below, any and all Registration Statements on
Form S-6, Form N-8B-2 and/or Form N-6, or any successors to these Forms, and
amendments thereto, filed with the Securities and Exchange Commission under the
Securities Act of 1933, on behalf of the Company in its own name or in the name
of one of its Separate Accounts, hereby ratifying and confirming our signatures
as they may be signed by any of our attorneys-in-fact to any such Registration
Statement or amendment to said Registration Statement. The execution of this
document by each of the undersigned hereby revokes any and all Powers of
Attorney previously executed by said individual for this specific purpose.
WITNESS our hands and common seal on this 11th day of February, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ ROLAND C. BAKER
---------------------------------------- Director
Roland C. Baker
Subscribed and sworn to before me this
STATE OF ILLINOIS 11th day of February, 2000
COUNTY OF DuPAGE SS:
/s/ SHARON A. GEHRKE
--------------------------------------
Notary Public
Commission Expires: 8-12-00
</TABLE>
<PAGE>
Robert O. Sheppard Lincoln Financial Group
Corporate Counsel Lincoln Life & Annuity
Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202-2802
Telephone: (315) 428-8420
Facsimile: (315) 428-8419
May 12, 2000
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0506
Re: LLANY Separate Account R for Flexible Premium Variable Life
Insurance (the "Account")
Lincoln Life & Annuity Company of New York
Pre-Effective Amendment Number 1 File No. 333-33778
Dear Sirs:
As Corporate Counsel of Lincoln Life & Annuity Company of New York ("LLANY"),
I am familiar with the actions of the Board of Directors of LLANY,
establishing the Account and its method of operation and authorizing the
filing of a Registration Statement under the Securities Act of 1933, (and
amendments thereto) for the securities to be issued by the Account and the
Investment Company Act of 1940 for the Account itself.
In the course of preparing this opinion, I have reviewed the Charter and the
By-Laws of the Company, the Board actions with respect to the Account, and
such other matters as I deemed necessary or appropriate. Based on such
review, I am of the opinion that the variable life insurance policies (and
interests therein) which are the subject of the Registration Statement under
the Securities Act of 1933, as amended, for the Account will, when issued, be
legally issued and will represent binding obligations of the Company, the
depositor for the Account.
I further consent to the use of this opinion as an Exhibit to Pre-Effective
Amendment No. 1 to said Registration Statement and to the reference to me
under the heading "Experts" in said Registration Statement as amended.
Very truly yours,
/s/ Robert O. Sheppard
Robert O. Sheppard
Corporate Counsel
<PAGE>
[LOGO] LINCOLN
FINANCIAL GROUP
LINCOLN LIFE
The Lincoln National Life Insurance Company
350 Church Street
Hartford, CT 06103-1106
May 12, 2000
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0506
Re: LLANY Separate Account R for Flexible Premium Variable Life
Insurance ("Account")
Lincoln Life & Annuity Company of New York
Pre-Effective Amendment Number 1 File No. 333-33778
Dear Sirs:
This opinion is furnished in connection with the filing of the Registration
Statement on Form S-6 by Lincoln Life & Annuity Company of New York under the
Securities Act of 1933. The Prospectus included in said Registration
Statement describes flexible premium variable universal life insurance
policies (the "Policies"). The forms of Policies were prepared under my
direction.
In my opinion, the illustrations of benefits under the Policies included in
the section entitled "Illustrations" in the Prospectus, based on assumptions
stated in illustrations, are consistent with the provisions of the forms of
the Policies. The ages selected in the illustrations are representative of
the manner in which the Policies operate.
I hereby consent to the use of this opinion as an Exhibit to the Registration
Statement and the reference to me under the heading "Experts" in the
Prospectus.
Very truly yours,
/s/ Vaughn W. Robbins
Vaughn W. Robbins, FSA, MAAA
<PAGE>
Exhibit 7
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Pre-Effective Amendment No. 1 to the Registration Statement (Form S-6 No.
333-33778) pertaining to LLANY Separate Account R for Flexible Premium
Variable Life Insurance, and to the use therein of our reports dated (a)
March 10, 2000, with respect to the statutory-basis financial statements of
Lincoln Life & Annuity Company of New York, and (b) March 24, 2000, with
respect to the financial statements of LLANY Separate Account R for Flexible
Premium Variable Life Insurance.
/s/Ernst & Young LLP
Fort Wayne, Indiana
May 8, 2000
